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 $80 million. Taxable income is $260 million. No temporary differences existed at the beginning of the year, and the tax rate is 40%. Suppose the deferred portion of the rent collected was $70 million at the end of 2017. Taxable income is $280 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 $80 million. Taxable income is $260 million. No temporary differences existed at the beginning of the year, and the tax rate is 40%. Suppose the deferred portion of the rent collected was $70 million at the end of 2017. Taxable income is $280 million.

Explanation / Answer

Date Account Titles and Explanation Debit Credit 2016 Income tax expense (260*40%) 104 Deferred tax asset (80*40%) 32 Income tax payable 136 2017 Income tax expense (280*40%) 112 Deferred tax asset (70*40%) 28 Income tax payable 140

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