Skysong Corp. sold an investment on an installment basis. The total gain of $74,400 was reported for financial reporting purposes inthe 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% taxrate was not enacted in law until 2021. The accounting and tax data for the 3 years is shown below.Financial AccountingTax Return2020 (40% tax rate).Income before temporary difference$86,800$86,800Temporary difference74,40024,800Income$161,200$111,6002021 (20% tax rate)Income before temporary difference$86,800$86,800Temporary difference24,800Income$86,800$111,6002022 (20% tax rate).Income before temporary difference$86,800$86,800Temporary difference24,800Income$86,800$111,600Calculate cumulative temporary differences for years 2020-2022. (Negative amounts using either a negative sign preceding thenumber e.g. -45 or parentheses e.g. (45).)202020212022Cumulative temporary$$differenceCalculate current tax expense for years 2020-2022.Current taxbenefitfor 20202$Current taxexpensefor 2021$Current taxexpensefor 20222$Calculate deferred tax expense for 2020-2022.Deferred taxfor 20202$Deferred taxfor 2021$Deferred taxfor 2022$ Prepare the journal entries to record the income tax expense, deferred income taxes, and the income taxes payable at the endof each year. No deferred income taxes existed at the beginning of 2020. (Credit account titles are automatically indented whenamount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.)Date Account Titles and ExplanationDebitCredit20202021(To record the adjustment for the decrease in the enactedtax rate.)(To record income taxes.)2022

IAS 12 deals with the accounting treatment for "Income taxes"

Skysong Corp. sold an investment on an installment basis. The total gain of $74,400 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 $86,800 $86,800 Temporary difference 74,400 24,800 Income $161,200 $111,600 2021 (20% tax rate). Income before temporary difference $86,800 $86,800 Temporary difference 24,800 Income $86,800 $111,600 2022 (20% tax rate). Income before temporary difference $86,800 $86,800 Temporary difference 24,800 Income $86,800 $111,600

Skysong Corp. sold an investment on an installment basis. The total gain of $74,400 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 $86,800 $86,800 Temporary difference 74,400 24,800 Income $161,200 $111,600 2021 (20% tax rate). Income before temporary difference $86,800 $86,800 Temporary difference 24,800 Income $86,800 $111,600 2022 (20% tax rate). Income before temporary difference $86,800 $86,800 Temporary difference 24,800 Income $86,800 $111,600

FINANCIAL ACCOUNTING

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ISBN:9781259964947

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Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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12) Ehrlich Corporation prepared the following reconciliation for its first year of operations: Pretax financial income for 2021 $2,550,000 Excess depreciation expense (450,000) Taxable income $2,100,000 The temporary difference will reverse evenly over the next two years at an enacted tax rate of 30%. The enacted tax rate for 2021 is 20%. Prepare the journal entry for the income taxes for 2021
Pretax financial income for Lake Inc. is $300,000, and its taxable income is $100,000 for 2021. Its only temporary difference at the end of the period relates to a $70,000 difference due to excess depreciation for tax purposes. If the tax rate is 20% for all periods, compute the amount of income tax expense to report in 2021. No deferred income taxes existed at the beginning of the year.
At the end of 2012, its first year of operations, Glow Company prepared a reconciliation between accounting income and taxable income as reflected in the table below. The estimated litigation expense of P6,000,000 will be deductible in 2013 when it is expected to be actually paid. Use of the depreciable assets will result in taxable amounts of P3,000,000 in each of the next three years. The income tax rate is 30% for all years. Assuming no payment has been paid for income taxes, what is the income tax payable at the end of 2012? a. P0 b. P450,000 c. P900,000 d. P1,350,000
Gallo Light began operations in 2018. 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 2018 was $90,000, 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 2020. Gallo Light's pretax accounting income from the 2018 income statement was $830,000, which includes $40,000 of interest revenue from an investment in municipal bonds. There were no differences between accounting income and taxable income other than those described above.Required:(1.) Prepare the appropriate journal entry to record Gallo Light's 2018 income taxes. Show calculations.(2.) What is Gallo Light's 2018 net income?
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