Question

Exercise 19-14 Bonita Inc.’s only temporary difference at the beginning and end of 2019 is caused by a $3,750,000 deferred gain for tax purposes for an installment sale of a plant asset, and the related receivable (only one-half of which is classified as a current asset) is due in equal installments in 2020 and 2021. The related deferred tax liability at the beginning of the year is $1,500,000. In the third quarter of 2019, a new tax rate of 20% is enacted into law and is scheduled to become effective for 2021. Taxable income for 2019 is $6,250,000, and taxable income is expected in all future years.

Determine the amount reported as a deferred tax liability at the end of 2019. Deferred tax liability $enter the amount reported as a deferred tax liability at the end of 2016 SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT LINK TO TEXT

Prepare the journal entry necessary to adjust the deferred tax liability when the new tax rate is enacted into law. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT LINK TO TEXT

Draft the income tax expense portion of the income statement for 2019. Begin with the line “Income before income taxes.” Assume no permanent differences exist. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Bonita Inc.’s Income Statement (Partial) choose the accounting period December 31, 2019For the Year Ended December 31, 2019For the Quarter Ended December 31, 2019 select an opening name for this partial income statement AdjustmentCurrentDividendsExpensesIncome before Income TaxesIncome Tax ExpenseNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues $enter a dollar amount select an income statement section name AdjustmentCurrentDividendsExpensesIncome before Income TaxesIncome Tax ExpenseNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues select an income statement item     Adjustment    Current    Dividends    Expenses    Income before Income Taxes    Income Tax Expense    Net Income / (Loss)    Retained Earnings, January 1    Retained Earnings, December 31    Revenues    Total Expenses    Total Revenues     $enter a dollar amount select an income statement item     Adjustment    Current    Dividends    Expenses    Income before Income Taxes    Income Tax Expense    Net Income / (Loss)    Retained Earnings, January 1    Retained Earnings, December 31    Revenues    Total Expenses    Total Revenues     enter a dollar amount enter a total of the two previous amounts select a closing name for this statement AdjustmentCurrentDividendsExpensesIncome before Income TaxesIncome Tax ExpenseNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues $enter a total net income or loss amount Click if you would like to Show Work for this question: Open Show Work

Answer 1

Please find below table useful to compute desired results: -

End results would be as follows: -