Problem 19-07 (Part Level Submission)Pharoah Corp. sold an investment on an installment basis. The total gain of $86,400 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 2020, and 20% in 2021 and 2022. The 20% tax rate was not enacted in law until 2021. The accounting and tax data for the 3 years is shown below. Financial Accounting Tax Return2020 (40% tax rate) Income before temporary difference $100,800 $100,800Temporary difference 86,400 28,800Income $187,200 $129,600 2021 (20% tax rate) Income before temporary difference $100,800 $100,800Temporary difference 0 28,800Income $100,800 $129,600 2022 (20% tax rate) Income before temporary difference $100,800 $100,800Temporary difference 0 28,800Income $100,800 $129,600 2022 (20% tax rate).Income before temporary differenceTemporary difference$100,800$100,80028,800$129,600Income$100,800(a1)Calculate cumulative temporary differences for years 2020-2022. (Negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)202020212022Cumulative temporary differenceCalculate current tax expense for years 2020-2022.Current taxfor 2020 $Current taxV for 202i $Current taxfor 2022 $Calculate deferred tax expense for 2020-2022.Deferred taxV for 2020 $Deferred taxv for 2021 $Deferred taxfor 2022 $Click if you would like to Show Work for this question:Open Show Work

Current tax is the amount of tax determined to be payable in respect of taxable income for a period.…

Answered: Problem 19-07 (Part Level Submission)…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Problem 19-07 (Part Level Submission)

Pharoah Corp. sold an investment on an installment basis. The total gain of $86,400 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 2020, and 20% in 2021 and 2022. The 20% tax rate was not enacted in law until 2021. The accounting and tax data for the 3 years is shown below.

	Financial Accounting	Tax Return
2020 (40% tax rate)
Income before temporary difference	$100,800	$100,800
Temporary difference	86,400	28,800
Income	$187,200	$129,600

2021 (20% tax rate)
Income before temporary difference	$100,800	$100,800
Temporary difference	0	28,800
Income	$100,800	$129,600

2022 (20% tax rate)
Income before temporary difference	$100,800	$100,800
Temporary difference	0	28,800
Income	$100,800	$129,600

2022 (20% tax rate).
Income before temporary difference
Temporary difference
$100,800
$100,800
28,800
$129,600
Income
$100,800
(a1)
Calculate cumulative temporary differences for years 2020-2022. (Negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
2020
2021
2022
Cumulative temporary difference
Calculate current tax expense for years 2020-2022.
Current tax
for 2020 $
Current tax
V for 202i $
Current tax
for 2022 $
Calculate deferred tax expense for 2020-2022.
Deferred tax
V for 2020 $
Deferred tax
v for 2021 $
Deferred tax
for 2022 $
Click if you would like to Show Work for this question:
Open Show Work

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