Pharoah Company, which began operations at the beginning of 2023, produces various products on a contract basis. Each contract generates a gross profit of $82,000. Some of Pharoah's contracts provide for the customer to pay on an installment basis. Under these contracts, Pharoah collects one-fifth of the contract revenue in each of the following 4 years. For financial reporting purposes, the company recognizes gross profit in the year of completion (accrual basis). For tax purposes, Pharoah recognizes gross profit in the year cash is collected (installment basis). Presented below is information related to Pharoah's operations for 2025: 1. In 2025, the company completed seven contracts that allow for the customer to pay on an installment basis. Pharoah recognized the related gross profit of $574,000 for financial reporting purposes. It reported only $114,800 of gross profit on installment sales on the 2025 tax return. The company expects future collections on the related installment receivables to result in taxable amounts of $114,800 in each of the next 4 years. 2. In 2025, nontaxable municipal bond interest revenue was $25,200.
Pharoah Company, which began operations at the beginning of 2023, produces various products on a contract basis. Each contract generates a gross profit of $82,000. Some of Pharoah's contracts provide for the customer to pay on an installment basis. Under these contracts, Pharoah collects one-fifth of the contract revenue in each of the following 4 years. For financial reporting purposes, the company recognizes gross profit in the year of completion (accrual basis). For tax purposes, Pharoah recognizes gross profit in the year cash is collected (installment basis). Presented below is information related to Pharoah's operations for 2025: 1. In 2025, the company completed seven contracts that allow for the customer to pay on an installment basis. Pharoah recognized the related gross profit of $574,000 for financial reporting purposes. It reported only $114,800 of gross profit on installment sales on the 2025 tax return. The company expects future collections on the related installment receivables to result in taxable amounts of $114,800 in each of the next 4 years. 2. In 2025, nontaxable municipal bond interest revenue was $25,200.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
prepare the jouranal entry to record income taxes for 2025
Transcribed Image Text:2.
In 2025, nontaxable municipal bond interest revenue was $25,200.
3.
During 2025, nondeductible fines and penalties of $27,600 were paid.
4.
Pretax financial income for 2025 amounts to $500,000.
5.
Tax rates (enacted before the end of 2025) are 30% for 2025 and 20% for 2026 and later.
6.
The accounting period is the calendar year.
7.
The company is expected to have taxable income in all future years.
8.
The company has no deferred tax assets or liabilities at the end of 2024.
Transcribed Image Text:Pharoah Company, which began operations at the beginning of 2023, produces various products on a contract basis. Each contract
generates a gross profit of $82,000. Some of Pharoah's contracts provide for the customer to pay on an installment basis. Under these
contracts, Pharoah collects one-fifth of the contract revenue in each of the following 4 years. For financial reporting purposes, the
company recognizes gross profit in the year of completion (accrual basis). For tax purposes, Pharoah recognizes gross profit in the year
cash is collected (installment basis).
Presented below is information related to Pharoah's operations for 2025:
1.
In 2025, the company completed seven contracts that allow for the customer to pay on an installment basis. Pharoah
recognized the related gross profit of $574,000 for financial reporting purposes. It reported only $114,800 of gross profit on
installment sales on the 2025 tax return. The company expects future collections on the related installment receivables to
result in taxable amounts of $114,800 in each of the next 4 years.
2.
In 2025, nontaxable municipal bond interest revenue was $25,200.
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