7 on 2018 $370,000 290,000 360,000 400,000 2020 2021 of 2018 was an installment

Question

7 on 2018 $370,000 290,000 360,000 400,000 2020 2021 of 2018 was an installment sale of property in the amount of $36,000. However, for tax purposes, Deville Included in the reported the income in the year cash was collected. Cash collected on the installment sale was $14,400 in 2019, $18,000 in 2020, Print References and $3,600 in 2021. Included in the 2020 income was $13,000 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. 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.) Journal entry worksheet 2018 income taxes. K Prev 7 of 12Next>

Explanation / Answer

2018_Taxable income = Financial income - installment sales

                   = 370000-36000

                   = 334000

2019)

Taxable Income : 290000+14400=304400

Installment sale due for collection : 18000+3600 = 21600

deferred tax liability due at 25 % = 21600*.25 =5400

Deferred tax liability to be reversed in 2019 (as tax rate will change in next year) =10800-5400= 5400

2020)Interest on municipal bonds are tax free for tax purpose so it will create a permanent difference

Taxable income = 360000+18000-13000= 365000

2021)

Taxable income :400000+3600=403600

tax payable [403600*.25]

Date Account Debit credit 2018 Tax expense 111000 Deferred tax liability [36000*.30] 10800 Tax payable [334000*.30] 100200

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