Dixon Development began operations in December 2021. When lots for industrial development are sold, Dixon recognizes income for financial reporting purposes in the year of the sale. For some lots, Dixon recognizes income for tax purposes when collected. Income recognized for financial reporting purposes in 2021 for lots sold this way was $20 million, which will be collected over the next three years. Scheduled collections for 2022–2024 are as follows: 2022 $ 8 million 2023 10 million 2024 2 million $ 20 million Pretax accounting income for 2021 was $29 million. The enacted tax rate is 40%. Required: 1. Assuming no differences between accounting income and taxable income other than those described above, prepare the journal entry to record income taxes in 2021. 2. Suppose a new tax law, revising the tax rate from 40% to 35%, beginning in 2023, is enacted in 2022, when pretax accounting income was $24 million. No 2022 lot sales qualified for the special tax treatment. Prepare the appropriate journal entry to record income taxes in 2022. 3. If the new tax rate had not been enacted, what would have been the appropriate balance in the deferred tax liability account at the end of 2022?
Dixon Development began operations in December 2021. When lots for industrial development are sold, Dixon recognizes income for financial reporting purposes in the year of the sale. For some lots, Dixon recognizes income for tax purposes when collected. Income recognized for financial reporting purposes in 2021 for lots sold this way was $20 million, which will be collected over the next three years. Scheduled collections for 2022–2024 are as follows:
| 2022 | $ | 8 | million |
| 2023 | 10 | million | |
| 2024 | 2 | million | |
| $ | 20 | million | |
Pretax accounting income for 2021 was $29 million. The enacted tax rate is 40%.
Required:
1. Assuming no differences between accounting income and taxable income other than those described above, prepare the
2. Suppose a new tax law, revising the tax rate from 40% to 35%, beginning in 2023, is enacted in 2022, when pretax accounting income was $24 million. No 2022 lot sales qualified for the special tax treatment. Prepare the appropriate journal entry to record income taxes in 2022.
3. If the new tax rate had not been enacted, what would have been the appropriate balance in the
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