Chapter 16 Homework Saved The DeVille Company reported pretax accounting income
ID: 2339746 • Letter: C
Question
Chapter 16 Homework Saved The DeVille Company reported pretax accounting income on its income statement as follows 2018 2019 2020 2021 $450,000 370,000 440,000 480,000 8.33 points Skipped Included In the Income of 2018 was an installment sale of property In the amount of $70,000. However, for tax purposes, DeVille reported the Income In the year cash was collected. Cash collected on the installment sale was $28,000 in 2019, $35,000 In 2020 and $7,000 In 2021 eBook Included In the 2020 Income was $30,000 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 transactlon/event, select "No Journal entry required" In the first account field.) References View transaction list Journal entry worksheet 4 Record 2018 income taxe Note: Enter debits before credits Date General Journal Debit Credit Dec 31, 2018Explanation / Answer
Year - 2018
Reported Income
450,000
(-) Installment Sale Included
70,000
Taxable Income
380,000
Tax liability = 380000 * 0.30 = 114,000
Deferred Tax liability = 70000 * 0.30 = 21000
Total tax expenses of the year = 114000 + 21000 = 135000
Debit
Credit
Tax expenses
135000
Tax payable
114000
Deferred tax liability
21000
Year - 2019
Reported Income ( 2019)
370,000
(+) Installment collected
28000
Taxable Income
398,000
Tax liability = 398000 * 0.30 = 119,400
Deferred Tax liability (debit) = 28000 * 0.30 = 8400
Total tax expenses of the year = 119,400 - 8400 = 111000
Debit
Credit
Tax expenses
111,000
Deferred tax liability
8400
Tax payable
119,400
Year - 2020
Reported Income ( 2020)
440,000
(+) Installment collected
35,000
Taxable Income
475,000
Tax liability = 475,000 * 0.25 = 118,750
Deferred Tax liability (debit) = 28000 * 0.25 = 7000
Total tax expenses of the year = 118,750 - 7000 = 111,750
Debit
Credit
Tax expenses
111,750
Deferred tax liability
7,000
Tax payable
118,750
Year - 2021
Reported Income ( 2021)
480,000
(+) Installment collected
7,000
Taxable Income
487,000
Tax liability = 487,000 * 0.25 = 121,750
Deferred Tax liability (debit) = 7000 * 0.25 = 1750
Total tax expenses of the year = 121,750 - 1750 = 120,000
Debit
Credit
Tax expenses
120,000
Deferred tax liability
1,750
Tax payable
121,750
Reported Income
450,000
(-) Installment Sale Included
70,000
Taxable Income
380,000
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