BestBuy Inc. reports pretax book income amounting to $300 million for installment sales on their 2014...

BestBuy Inc. reports pretax book income amounting to $300 million for installment sales on their 2014 income statement. $160 million worth of the installment sales were sold on account during 2014 and will be collected in cash in 2015. The remainder of the installment sales were paid in full by the end of 2014. The tax rate for 2014 is 35%.

Based on this information, what is the journal entry to be made on December 31, 2014 to record taxes? (Write Dr. or Cr. then account name and then the amount for each line item)

Solutions

Expert Solution

Date	Account title and explanation	Debit	credit
31 december 2014	Income tax expense [300 * .35]	105
	Deferred tax liability [160 *.35]		56
	Income tax payable		49
	[being income tax expense recorded for 2014]

**Installment sales collected in 2015 will be taxed in 2015 resulting in deferred tax liability.

ekkarill92 answered 1 year ago

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