Question

The DeVille Company reported pretax accounting income on its income statement as follows:
   

2018	$	410,000
2019		330,000
2020		400,000
2021		440,000

   
Included in the income of 2018 was an installment sale of property in the amount of $54,000. However, for tax purposes, DeVille reported the income in the year cash was collected. Cash collected on the installment sale was $21,600 in 2019, $27,000 in 2020, and $5,400 in 2021.

Included in the 2020 income was $22,000 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

. Journal Entry
Date	Account Desription , Title	Debit	Credit
2018	Income Tax Expense	$123,000
	Deffered Tax Expense		$16,200
	Income Tax Payable		$106,800
	To Record Income Tax Expense & DTL Created
2019	Income Tax Expense	$97,380
	Deffered Tax Expense	$8,100
	Income Tax Payable		$105,480
	To Record Income Tax Expense & DTL Reversal
2020	Income Tax Expense	$100,000
	Deffered Tax Expense	$6,750
	Income Tax Payable		$106,750
	To Record Income Tax Expense & DTL Reversal
2021	Income Tax Expense	$110,000
	Deffered Tax Expense	$1,350
	Income Tax Payable		$111,350
	To Record Income Tax Expense & DTL Reversal
	Working Note for Computation of Income Tax Expense, Deffered Tax Liability
		2018	2019	2020	2021
	Pretax Accounting Income	$410,000	$330,000	$400,000	$440,000
	Less: installment of Sales	-$54,000
	Add: Cash Collected on Installment		$21,600	$27,000	$5,400
	Taxable Income	$356,000	$351,600	$427,000	$445,400
	Tax Rate	30%	30%	25%	25%
	Income Tax Payable as per Taxable income	$106,800	$105,480	$106,750	$111,350
	Deferred Tax Liability Created at the End	$16,200	$8,100	$1,350	$0
		=54000*30%	=(54000-21600)*25%	=54000-21600-27000)25%	=54000-21600-27000-5400)25%
	Deffered Tax Reversal	-	$8,100.00	$6,750.00	$1,350.00
			(16200-8100)	(8100-1350)	(1350-0)
	Income Tax Expense	$123,000.00	$97,380.00	$100,000.00	$110,000.00