Case Development began operations in December 2016. When property is sold on an

Question

Case Development began operations in December 2016. 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. 2016 Installment Income was $400,000 and will be collected over the next three years. Scheduled collections and enacted tax rates for 2017-2019 are as follows: 2017 $. 80,000 20% 2018 230,000 30 2019 90,000 30 Pretax accounting Income for 2016 was $570,000, which Includes Interest revenue of $20,000 from municipal bonds. The enacted tax rate for 2016 is 20%. 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 2016 Income taxes. (f no entry Is required for a transaction/event,sel "No Journel entry requlred" In the first eccount field. Enter your answers In thousands.)

Explanation / Answer

Solution:-

Part 1.

Explanation 1:-

Deferred tax liability = (80,000 * 20%) + (230,000 * 30%) + (90,000 * 30%)

= 112,000

Part 2.

Part 3.

Current assest 2017  Installment Receivable of $80,000

Therefore, 20% x $80,000 = $16,000 DTL, Current Liabilities

Noncurrent Asset: 2018 and 2019 Installment Receivable of $230,000 and $90,000

Therefore, 30% x ($230,000+ $90,000) = $96,000 DTL, Long-term Liabilities

Please Rate or comment if you have any doubt regarding this solution.

Event General journal Debit Credit 1 Tax expenses 142,000 Deferred tax liability (Explanation 1) 112,000 Taxes payable (150,000 * 20%) 30,000

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