Question

The DeVille Company reported pretax accounting income on its income statement as follows: 2018 $ 415,000 2019 335,000 2020 405,000 2021 445,000 Included in the income of 2018 was an installment sale of property in the amount of $56,000. However, for tax purposes, DeVille reported the income in the year cash was collected. Cash collected on the installment sale was $22,400 in 2019, $28,000 in 2020, and $5,600 in 2021. Included in the 2020 income was $23,000 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 taxes for the years 2018–2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

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Year : 2018
Pretax Accounting Income	$ 415,000
Less: Installment Revenue	$ -56,000
Add: Installment Collection
Taxable Income	$ 359,000
Account	Debit	Credit
Tax Expense	$ 124,500
Deferred Tax Liability 56000*30%		$   16,800
Tax Payable 359000*30%		$ 107,700
Year : 2019
Pretax Accounting Income	$ 335,000
Less: Installment Revenue
Add: Installment Collection	$   22,400
Taxable Income	$ 357,400
Account	Debit	Credit
Tax Expense (plug)	$   98,820
Deferred Tax Liability (56000-22400)*25%	$      8,400
Tax Payable 357400*30%		$ 107,220
Year : 2020
Pretax Accounting Income	$ 405,000
Less: Permanend Diff	$ -23,000
Adj Pretax Accounting Income	$ 382,000
Less: Installment Revenue
Add: Installment Collection	$   28,000
Taxable Income	$ 410,000
Account	Debit	Credit
Tax Expense	$   95,500
Deferred Tax Liability 28000*25%	$      7,000
Tax Payable 410000*25%		$ 102,500
Year : 2021
Pretax Accounting Income	$ 445,000
Less: Installment Revenue
Add: Installment Collection	$      5,600
Taxable Income	$ 450,600
Account	Debit	Credit
Tax Expense	$ 111,250
Deferred Tax Liability 5600*25%	$      1,400
Tax Payable 450600*25%		$ 112,650