Financial Tax Accounting Return 2017 (40% tax rate) Income before temporary difference Temporary difference $ 70,000 60,000 $70,000 20,000 Income $130,000 $90,000 2018 (35% tax rate) $ 70,000 Income before temporary difference Temporary difference $70,000 -0- 20,000 Income $ 70,000 $90,000 2019 (35% tax rate) $ 70,000 Income before temporary difference Temporary difference $70,000 20,000 -0- Income $ 70,000 $90,000
(One Temporary Difference, Tracked 3 Years, Change in Rates, Income Statement Presentation) Crosley Corp. sold an investment on an installment basis. The total gain of $60,000 was reported for financial reporting purposes in the period of sale. The company qualifies to use the installment-sales method for tax purposes. The installment period is 3 years; one-third of the sale price is collected in the period of sale. The tax rate was 40% in 2017, and 35% in 2018 and 2019. The 35% tax rate was not enacted in law until 2018. The accounting and tax data for the 3 years is shown below.
Check the below image for accounting and tax data.
Instructions
(a) Prepare the
(b) Explain how the
(c) Draft the income tax expense section of the income statement for each year, beginning with “Income before income taxes.”
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