Business, 20.10.2020 21:01 shealwaysknows23

The DeVille Company reported pretax accounting income on its income statement as follows:. 2018 $440,000
2019 360,000
2020 430,000
2021 470,000
Included in the income of 2018 was an installment sale of property in the amount of $66,000. However, for tax purposes, DeVille reported the income in the year cash was collected. Cash collected on the installment sale was $26,400 in 2019, $33,000 in 2020, and $6,600 in 2021. Included in the 2020 income was $28,000 interest from investments in municipal bonds. The enacted tax rate for 2018 and 2019 was 30%, but during 2019 new tax legislation was passed reducing the tax rate to 25% for the years 2020 and beyond.
Required:
Prepare the year-end journal entries to record income texes for the year 2018-2021.

Answers: 3

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Answer from: Isactuallycarter99

Entries and their narrations are posted below

Explanation:

We will record assets and expenses on the debit as they increase during the year and will record liabilities and capital on the credit side as they increase during the year or vice versa.

Journal Entries

2018

Dr Tax Expenses 132000

Cr Deferred Tax Liability (66000*30%) 19800

Cr Tax Payable (374000*30%) 112200

2019

Dr Tax Expenses 106,020

Dr Deferred Tax Liability (66000-26400)*25% 9,900

Cr Tax Payable (386400*30%) 115,920

2020

Dr Tax Expenses 100500

Dr Deferred Tax Liability (33000*25%) 8250

Cr Tax Payable (430000-28000+33000)*25% 108750

2021

Dr Tax Expenses 117750

Dr Deferred Tax Liability (5600*25%) 1400

Cr Payable (470000+6600)*25% 119150

Working

2018

Accrued Income 440000

Less: Instalment Revenue-66000

Taxable Income 374000

2019

Accrued Income 360000

Add: Instalment collection26400

Taxable Income 386400

2020

Accrued Income 430000

Less: Interest from municipal Bonds-23000

Add: Instalment collection 28000

Taxable Income 435000

2021

Accrued Income 470000

Add: Instalment collection6600

Taxable Income 476600

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The DeVille Company reported pretax accounting income on its income statement as follows:. 2018 $44...

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