Gallo Light began operations in 2016. The company sometimes sells used warehouse
ID: 2568002 • Letter: G
Question
Gallo Light began operations in 2016. The company sometimes sells used warehouses on an installment basis. In those cases, Gallo Light reports income in its income statement in the year of the sale. In its income tax return, though, Gallo Light reports installment income by the installment method. Installment income in 2016 was $88,800, which Gallo Light expects to collect equally over the next three years. The tax rate is 30%, but based on an enacted law, is scheduled to become 35% in 2018.
Gallo Light's pretax accounting income from the 2016 income statement was $828,000, which includes $38,000 of interest revenue from an investment in municipal bonds. There were no differences between accounting income and taxable income other than those described above.
Prepare the appropriate journal entry to record Gallo Light's 2016 income taxes. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in thousands. Round your answers to 2 decimal places.)
Gallo Light began operations in 2016. The company sometimes sells used warehouses on an installment basis. In those cases, Gallo Light reports income in its income statement in the year of the sale. In its income tax return, though, Gallo Light reports installment income by the installment method. Installment income in 2016 was $88,800, which Gallo Light expects to collect equally over the next three years. The tax rate is 30%, but based on an enacted law, is scheduled to become 35% in 2018.
Gallo Light's pretax accounting income from the 2016 income statement was $828,000, which includes $38,000 of interest revenue from an investment in municipal bonds. There were no differences between accounting income and taxable income other than those described above.
Explanation / Answer
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Journal
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Current Year Future taxable amounts 2016 2017 2018 2019 Total Accounting income 828 Permanent difference (38) Temporary difference: Installment sales (88.80) 29.60 29.60 29.60 Taxable income 701.20 Enacted tax rate 30% 30% 35% 35% Tax payable currently 210.36 Deferred tax liability 8.88 10.36 10.36 29.60 Less beginning balance 0 Change in balance: credit (debit) 29.60Related Questions
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