Case Development began operations in December 2011. When property is sold on an
ID: 2351127 • Letter: C
Question
Case Development began operations in December 2011. When property is sold on an installment basis, Case recognizes installment income for financial reporting purposes in the year of the sale. For tax purposes, installment income is reported by the installment method. 2011 installment income was $600,000 and will be collected over the next three years. Scheduled collections and enacted tax rates for 2012-2014 are as follows:2012 $150,000 30%
2013 250,000 40
2014 200,000 40
Pretax accounting income for 2011 was $810,000, which includes interest revenue of $10,000 from municipal bonds. The enacted tax rate for 2011 is 30%.
Required:
1. Assuming no differences between accounting income and taxable income other than those described above, prepare the appropriate journal entry to record Case’s 2011 income taxes.
2. What is Case’s 2011 net income?
3. How should the deferred tax amount be classified in a classified balance sheet?
Explanation / Answer
Exercise 16-25
Requirement 1
($ in thousands)
Current Future
Year Taxable
2011 Amounts
2012 2013 2014
Pretax accounting income 810
Permanent difference (10)
Temporary difference:
Installment sales (600) 150 250 200
Taxable income (tax return) 200
Enacted tax rate 30% 30% 40% 40%
Tax payable currently 60
Deferred tax liability 45 100 80 225
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