Question

Check n The DeVille Company reported pretax accounting income on its income statement as follows: $435,000 355,000 2018 6.66 2019 points 2020 425,000 465,000 2021 Skipped Included in the income of 2018 was an installment sale of property in the amount of $64,000. However, for tax purposes, DeVille reported the income in the year cash was collected. Cash collected on the installment sale was $25,600 in 2019, $32,000 in 2020, and $6,400 in 2021. Ask Included in the 2020 income was $27,000 interest from investments in municipal bonds. The enacted tax rate for 2018 and 2019 was 30%, but during 2019 new tax legislation was passed reducing the tax rate to 25% for the years 2020 and beyond Print Required: Prepare the year-end journal entries to record income taxes for the years 2018-2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) References View transaction list Journal entry worksheet > 3 4 Record 2018 income taxes Note: Enter debits before credits 1

Answer 1

ANSWER

Computation of Taxable Income and Income Tax Payable
Particulars	2018	2019	2020	2021
Pretax accounting income	$435,000.00	$355,000.00	$425,000.00	$465,000.00
Less: Income from installment sale property	-$64,000.00	$0.00	$0.00	$0.00
Add: Collection of installment sales	$0.00	$25,600.00	$32,000.00	$6,400.00
Less: Interest on municipal bonds	$0.00	$0.00	-$27,000.00	$0.00
Taxable Income	$371,000.00	$380,600.00	$430,000.00	$471,400.00
Income Tax Payable	$111,300.00	$114,180.00	$107,500.00	$117,850.00

Computation of Deferred Tax
Particulars	2018	2019	2020	2021
Collection of installment sale as per tax return	$0.00	$25,600.00	$32,000.00	$6,400.00
Income from installment sales as per books	$64,000.00	$0.00	$0.00	$0.00
Taxable Temporary differences	$64,000.00	$0.00	$0.00	$0.00
Reversible Temporary differences		-$25,600.00	-$32,000.00	-$6,400.00
Deferred tax liability	$19,200.00
Reversal of Deferred tax liability 2019 = ($25,600*30% + $38,400*5%) 2020 - $32,000*25% 2021 - $6,400*25%		$9,600.00	$8,000.00	$1,600.00

Journal Entries - Deville Company
Year	Particulars	Debit	Credit
2018	Income Tax Expense Dr	$130,500.00
	To Income tax Payable		$111,300.00
	To Deferred tax liability		$19,200.00
	(To record income tax and deferred tax for 2018)
2019	Income Tax Expense Dr	$104,580.00
	Deferred tax liability Dr	$9,600.00
	To Income tax Payable		$114,180.00
	(To record income tax and deferred tax for 2019)
2020	Income Tax Expense Dr	$99,500.00
	Deferred tax liability Dr	$8,000.00
	To Income tax Payable		$107,500.00
	(To record income tax and deferred tax for 2020)
2021	Income Tax Expense Dr	$116,250.00
	Deferred tax liability Dr	$1,600.00
	To Income tax Payable		$117,850.00
	(To record income tax and deferred tax for 2021)

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