In 2013, Ryan Management collected rent revenue for 2014 tenant occupancy. For f

Question

In 2013, Ryan Management collected rent revenue for 2014 tenant occupancy. For financial reporting, the rent is recognized as income in the period earned, but for income tax reporting it is taxed when collected. The unearned portion of the rent collected in 2013 was $40 million and $30 million at the end of 2014. Taxable income is $120 million. No temporary differences existed at the beginning of the year, and the tax rate is 30%. Prepare the appropriate journal entry to record income taxes for 2014.

Explanation / Answer

Journal Entry Dr. Cr. Profit & Loss A/c $96.00         To Current Tax Liab. $92.00         To Deferred Tax Assets $4.00 2014 $ in Million Taxable Income $230.00 Current Tax @40% $92.00 Deferred Tax Expense $4.00 Total Tax Expense $96.00 Op. Time Difference $70.00 Add: Time Diff. Created $60.00 Less: Reversed $70.00 Closing Time Diff. $60.00 DTA $24.00 Op. DTA $28.00 DTA Reversed -$4.00

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