In 2016, Ryan Management collected rent revenue for 2017 tenant occupancy. For f

Question

In 2016, Ryan Management collected rent revenue for 2017 tenant occupancy. For financial reporting, the rent is recorded as deferred revenue and then recognized as income in the period tenants occupy rental property. But for income tax reporting it is taxed when collected. The deferred portion of the rent collected in 2016 was $40 million. Taxable income is $100 million. No temporary differences existed at the beginning of the year, and the tax rate is 30%. Suppose the deferred portion of the rent collected was $30 million at the end of 2017. Taxable income is $120 million.

Prepare the appropriate journal entry to record income taxes. (If no entry is required for a particular event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

In 2016, Ryan Management collected rent revenue for 2017 tenant occupancy. For financial reporting, the rent is recorded as deferred revenue and then recognized as income in the period tenants occupy rental property. But for income tax reporting it is taxed when collected. The deferred portion of the rent collected in 2016 was $40 million. Taxable income is $100 million. No temporary differences existed at the beginning of the year, and the tax rate is 30%. Suppose the deferred portion of the rent collected was $30 million at the end of 2017. Taxable income is $120 million.

Prepare the appropriate journal entry to record income taxes. (If no entry is required for a particular event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

Explanation / Answer

Ryan Management

Journal Entries

Date Account Titles Debit Credit 12/31/2016 Deferred Tax Asset A/c $12         To Deferred Tax Expense A/c $12 (Being deferred tax recorded) 12/31/2016 Income tax expense A/c $18 Deferred Tax Expense A/c $12          To Provision for taxes A/c $30 ( Being provision for taxes made) 12/31/2016 Provision for taxes A/c $30          To Bank A/c $30 ( Being taxes paid ) 12/31/2017 Deferred Tax Asset A/c $9         To Deferred Tax Expense A/c $9 (Being deferred tax recorded) 12/31/2017 Income tax expense A/c $27 Deferred Tax Expense A/c $9          To Provision for taxes A/c $36 ( Being provision for taxes made) 12/31/2017 Provision for taxes A/c $36          To Bank A/c $36 ( Being taxes paid )

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