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AysviL [449]
3 years ago
6

Taxable income and pretax financial income would be identical for Skysong Co. except for its treatments of gross profit on insta

llment sales and estimated costs of warranties. The following income computations have been prepared.
Taxable income 2019 2020 2021
Excess of revenues over
expenses (excluding two
temporary differences) $154,000 $191,000 $88,100
Installment gross profit
collected 8,500 8,500 8,500
Expenditures for warranties (4,500) (4,500) (4,500)
Taxable income $158,000 $195,000 $92,100
Pretax financial income 2019 2020 2021
Excess of revenues over
expenses (excluding two
temporary differences) $154,000 $191,000 $88,100
Installment gross profit
recognized 25,500 -0- -0-
Estimated cost of
warranties (13,500) -0- -0-
Income before taxes $166,000 $191,000 $88,100
The tax rates in effect are 2019, 40%; 2020 and 2021, 45%. All tax rates were enacted into law on January 1, 2019. No deferred income taxes existed at the beginning of 2019. Taxable income is expected in all future years. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2016, 2017, and 2018.
Business
1 answer:
inessss [21]3 years ago
5 0

Answer:

See the journal entry below.

Explanation:

Before preparing the journal entry, the following are calculated first:

Income tax expense in 2019 = (Taxable income in 2019 * Tax rate in 2019) + (Taxable income in 2020 * Tax rate in 2020) + (Taxable income in 2021 * Tax rate in 2021) = ($158,000 * 40%) + ($195,000 * 45%) + ($92,100 * 45%) = $193,395

Deferred tax liability in 2019 = (Taxable income in 2020 * Tax rate in 2020) + (Taxable income in 2021 * Tax rate in 2021) = ($195,000 * 45%) + ($92,100 * 45%) = $129,195

Income tax payable in 2019 = Taxable income in 2019 * Tax rate in 2019 = $158,000 * 40% = $63,200

Income tax payable in 2020 = Taxable income in 2020 * Tax rate in 2020 = $195,000 * 45% = $87,750

Income tax payable in 2021 = Taxable income in 2021 * Tax rate in 2021 = $92,100 * 45% = $41,445

The journal entry will look as follows:

<u>Date                  General journal                  Debit ($)         Credit ($)    </u>

31 Dec 2019      Income tax expense          193,395  

                             Deferred tax liability                                129,195      

                             Income tax payable                                 63,200

<u><em>                            (To record income tax payable.)                                 </em></u>

31 Dec 2020     Deferred tax liability            87,750      

                             Income tax payable                                 87,750

<u><em>                            (To record income tax payable.)                                 </em></u>

31 Dec 2021     Deferred tax liability            41,445      

                             Income tax payable                                41,445

<u><em>                            (To record income tax payable.)                                 </em></u>

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3 years ago
Assume that Jack, Hal, and Sophia enter into a valid contract for the sale of the restaurant and for a covenant not to compete.
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Answer: Option (B)

Explanation:

Condition subsequent clause is referred to as an exit clause from the existing contract. This agreement in between the parties tends to include languages that loosens or frees one of individuals from the agreement or the deal. This tends to mostly occur when the conditional outcome or result takes place. The conditional subsequent relieves an individual or a party from all the obligations.

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3 years ago
On January 1, 2017, Eagle borrows $16,000 cash by signing a four-year, 5% installment note. The note requires four equal total p
goblinko [34]

Answer:

<u>Issuance - January 1, 2017</u>

Cash $16,000 (debit)

Note Payable $16,000 (credit)

<u>December 31, 2017</u>

Interest Expense $800 (debit)

Note Payable $3,712.19 (debit)

Cash $4,512.19 (credit)

<u>December 31, 2018</u>

Interest Expense $614.39 (debit)

Note Payable $3,897.80 (debit)

Cash $4,512.19 (credit)

<u>December 31, 2019</u>

Interest Expense $419.50 (debit)

Note Payable $4,092.69 (debit)

Cash $4,512.19 (credit)

<u>December 31, 2020</u>

Interest Expense $214.87 (debit)

Note Payable $4,297.32 (debit)

Cash $4,512.19 (credit)

Explanation:

The Loan Amortization Schedule is most appropriate way to solve all parts of this problem.

The first step to construction of the Amortization Schedule is to determine the payments made annually, PMT (interest and principal).

Using a Financial calculator, this can be determined as ;

Pv = $16,000

r = 5%

n = 4

Fv = $0

p/yr = 1

Pmt = ?

Thus PMT is $4,512.19.

Amortisation Schedule (Extracted from Financial Calculator)

<u>2017</u>

Principle Payment = $3,712.19

Interest Payment = $800

Balance =  $12,287.81

Accounting Entries :

Interest Expense $800 (debit)

Note Payable $3,712.19 (debit)

Cash $4,512.19 (credit)

<u>2018</u>

Principle Payment = $3,897.80

Interest Payment = $614.39

Balance =  $8,390

Accounting Entries :

Interest Expense $614.39 (debit)

Note Payable $3,897.80 (debit)

Cash $4,512.19 (credit)

<u>2019</u>

Principle Payment = $4,092.69

Interest Payment = $419.50

Balance =  $4,297.32

Accounting Entries :

Interest Expense $419.50 (debit)

Note Payable $4,092.69 (debit)

Cash $4,512.19 (credit)

<u>2020</u>

Principle Payment = $4,297.32

Interest Payment = $214.87

Balance =  $0

Accounting Entries :

Interest Expense $214.87 (debit)

Note Payable $4,297.32 (debit)

Cash $4,512.19 (credit)

8 0
3 years ago
Matt is considering the purchase of a condo on a mortgage. However, he is not sure on the amount of mortgage he is eligible for.
Rudiy27

Answer:

A. Prequalification

Explanation:

First, the Options to the Question

a. Prequalification

b. A contingency clause

c. A Multiple Listing Service

d. Due diligence

What is a PreQualification in Mortgage Processing

Because most persons who are interested in buying a home do not have hundreds of thousands of dollars in cash to purchase the home of their dreams, the concept of mortgage is to approach a lender who will then advance the needed sum for the purchase and then the borrower will pay the advanced sum over some time (most times up to 30 years) at an interest rate.

A PreQualification is a process through which the lender evaluates the creditworthiness of the borrower and also decide the amount of loan the borrower is entitled to. This is done through the financial documents and records made available to the lender by the borrower

One important takeaway from a prequalification is that it is an approximation of what a borrower is entitled to base solely on the information given to the lender. It is, therefore, an approximation which can be less or more when the official application for the loan is submitted.

As stated in the question, getting a prequalification helps Matt to identify and understand the areas of problems and credit report errors that may arise and then he can use the prequalification information to attend to these errors and ensure a proper application is submitted that will allow him to maximise the amount of loan that can be made available to him.

Once Matt has corrected errors and identified problems that may arise on his mortgage application, he then gathers the relevant document and goes for the first formal process in mortgage processing which is the preapproval.

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3 years ago
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That statement is false.
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