Dixon Development began operations in December 2021. When lots for industrial development are sold, Dixor recognizes income for financial reporting purposes in the year of the sale. For some lots, Dixon recognizes income fo tax purposes when collected. Income recognized for financial reporting purposes in 2021 for lots sold this way was $13 million, which will be collected over the next three years. Scheduled collections for 2022–2024 are as follows: 2022$ 5 million 2023 6 million 2024 2 million $13 million Pretax accounting income for 2021 was $18 million. The enacted tax rate is 30%. Required: 1. Assuming no differences between accounting income and taxable income other than those described above, prepare the journal entry to record income taxes in 2021. 2. Suppose a new tax law, revising the tax rate from 30% to 25%, beginning in 2023, is enacted in 2022, when pretax accounting income was $14 million. No 2022 lot sales qualified for the special tax treatment. Prepare the appropriate journal entry to record income taxes in 2022. 3. If the new tax rate had not been enacted, what would have been the appropriate balance in the deferred tax liability account at the end of 2022?
Dixon Development began operations in December 2021. When lots for industrial development are sold, Dixor recognizes income for financial reporting purposes in the year of the sale. For some lots, Dixon recognizes income fo tax purposes when collected. Income recognized for financial reporting purposes in 2021 for lots sold this way was $13 million, which will be collected over the next three years. Scheduled collections for 2022–2024 are as follows: 2022$ 5 million 2023 6 million 2024 2 million $13 million Pretax accounting income for 2021 was $18 million. The enacted tax rate is 30%. Required: 1. Assuming no differences between accounting income and taxable income other than those described above, prepare the journal entry to record income taxes in 2021. 2. Suppose a new tax law, revising the tax rate from 30% to 25%, beginning in 2023, is enacted in 2022, when pretax accounting income was $14 million. No 2022 lot sales qualified for the special tax treatment. Prepare the appropriate journal entry to record income taxes in 2022. 3. If the new tax rate had not been enacted, what would have been the appropriate balance in the deferred tax liability account at the end of 2022?
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter22: Accounting For Changes And Errors.
Section: Chapter Questions
Problem 2RE: Heller Company began operations in 2019 and used the LIFO method to compute its 300,000 cost of...
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Transcribed Image Text:Dixon Development began operations in December 2021. When lots for industrial development are sold, Dixor
recognizes income for financial reporting purposes in the year of the sale. For some lots, Dixon recognizes income for
tax purposes when collected. Income recognized for financial reporting purposes in 2021 for lots sold this way was $13
million, which will be collected over the next three years. Scheduled collections for 2022–2024 are as follows:
2022$ 5 million
2023 6 million
2024 2 million
$13 million
Pretax accounting income for 2021 was $18 million. The enacted tax rate is 30%.
Required:
1. Assuming no differences between accounting income and taxable income other than those described above,
prepare the journal entry to record income taxes in 2021.
2. Suppose a new tax law, revising the tax rate from 30% to 25%, beginning in 2023, is enacted in 2022, when pretax
accounting income was $14 million. No 2022 lot sales qualified for the special tax treatment. Prepare the appropriate
journal entry to record income taxes in 2022.
3. If the new tax rate had not been enacted, what would have been the appropriate balance in the deferred tax liability
account at the end of 2022?
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