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Free_Kalibri [48]
3 years ago
13

Gallo Light began operations in 2021. The company sometimes sells used warehouses on an installment basis. In those cases, Gallo

Light reports income in its income statement in the year of the sale. In its income tax return, though, Gallo Light reports installment income by the installment method. Installment income in 2021 was $570,000, which Gallo Light expects to collect equally over the next three years. The tax rate is 25%, but based on an enacted law, is scheduled to become 30% in 2023.
Gallo Light's pretax accounting income from the 2021 income statement was $824,000, which includes $34,000 of interest revenue from an investment in municipal bonds. There were no differences between accounting income and taxable income other than those described above.

Required:

1. Prepare the appropriate journal entry to record Gallo Light's 2021 income taxes. Show calculations.
2. What is Gallo Light's 2021 net income?
Business
1 answer:
Dvinal [7]3 years ago
3 0

Answer and Explanation:

Before passing the journal entries we need to do following calculations

Particular Current year  Future taxable amounts ($ in 000s)

                        2021 2022      2023         2024  

Accounting

income         $824    

less: Permanent

difference ($34 )    

Temporary difference :      

less: installments

sales         ($570 )    $190       $190        $190  

Taxable

income          $220    

Multiply

Enacted tax rate 25%   25%          30% 30%  

Tax payable

currently      $55

Deferred tax liability        $47.5              $57       $57             $161.50

Less: Beginning balance                         $0

Change in balance : credit (debit )           $161.50

1. Now the journal entry is

On 2021

Income tax expense ($161.50 + $55) $216.50  

                        To  Deferred tax liability $161.50

                         To Income tax payable $55

(Being the income tax for 2021 is recorded)

2. And, the net income is

= Pre accounting income - income tax expense

= $824,000 - $216,500

= $607,500

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The statement is true.

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In preparing a bank reconciliation, the amount of an error indicating the recording of a check in the journal for an amount larger than the amount of the check is added to the balance per company's records.

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The following December 31, 2021, fiscal year-end account balance information is available for the Stone Corporation:Cash and cas
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Answer:

1.

Total current assets  = $112500

2.

Short term investments = $2300

3.

Retained earnings = $15500

Explanation:

1.

The total current assets can be determined using the current ratio provided for 2021. The current ratio is calculated by dividing the value of total current assets by the value of the total current liabilities.

1.5  =  Total current assets / (51000 + 23000 + 1000)

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2.

Short term investments are a part of the current assets. The value of short term investments is,

112500 = 6200 + 32000 + 72000 + Short term investments

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3.

The basic accounting equation states that the total assets is always equal to the value of total liabilities plus total equity.

Total assets = Total Liabilities + Total Equity

(112500 + 180000) = [(51000 + 23000 + 1000) + 42000]  +  (160000 + Retained earnings)

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Retained earnings = $15500

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