The following information was disclosed during the audit of Sandhill Inc. 1. 2. 3. 4. 5. Year 2025 2026 Amount Due per Tax Return $133,200. 108,600 On January 1, 2025, equipment costing $625,200 is purchased. For financial reporting purposes, the company uses straight- line depreciation over a 5-year life. For tax purposes, the company uses the elective straight-line method over a 5-year life. (Hint: For tax purposes, the half-year convention as discussed in Appendix 10A must be used.) In January 2026, $219,000 is collected in advance rental of a building for a 3-year period. The entire $219,000 is reported as taxable income in 2026, but $146,000 of the $219,000 is reported as unearned revenue in 2026 for financial reporting purposes. The remaining amount of unearned revenue is to be recognized equally in 2027 and 2028. The tax rate is 20% in 2025 and all subsequent periods. (Hint: To find taxable income in 2025 and 2026, the related income taxes payable amounts will have to be "grossed up.") No temporary differences existed at the end of 2024. Sandhill expects to report taxable income in each of the next 5 years.

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
Chapter18: Accounting For Income Taxes
Section: Chapter Questions
Problem 5RE: Turnip Company purchased an asset at a cost of 10,000 with a 10-year life during the current year....
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(e)
Your answer is partially correct.
Prepare the journal entry to record income taxes for 2026. (List all debit entries before credit entries. Credit account titles are
automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and
enter o for the amounts.)
Account Titles and Explanation
Income Tax Expense
Deferred Tax Asset
Income Tax Payable
Debit
Credit
108600
Transcribed Image Text:(e) Your answer is partially correct. Prepare the journal entry to record income taxes for 2026. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Account Titles and Explanation Income Tax Expense Deferred Tax Asset Income Tax Payable Debit Credit 108600
The following information was disclosed during the audit of Sandhill Inc.
1.
2.
3.
4.
5.
Year
2025
2026
Amount Due
per Tax Return
$133,200
108,600
On January 1, 2025, equipment costing $625,200 is purchased. For financial reporting purposes, the company uses straight-
line depreciation over a 5-year life. For tax purposes, the company uses the elective straight-line method over a 5-year life.
(Hint: For tax purposes, the half-year convention as discussed in Appendix 10A must be used.)
In January 2026, $219,000 is collected in advance rental of a building for a 3-year period. The entire $219,000 is reported as
taxable income in 2026, but $146,000 of the $219,000 is reported as unearned revenue in 2026 for financial reporting
purposes. The remaining amount of unearned revenue is to be recognized equally in 2027 and 2028.
The tax rate is 20% in 2025 and all subsequent periods. (Hint: To find taxable income in 2025 and 2026, the related income
taxes payable amounts will have to be "grossed up.")
No temporary differences existed at the end of 2024. Sandhill expects to report taxable income in each of the next 5 years.
Transcribed Image Text:The following information was disclosed during the audit of Sandhill Inc. 1. 2. 3. 4. 5. Year 2025 2026 Amount Due per Tax Return $133,200 108,600 On January 1, 2025, equipment costing $625,200 is purchased. For financial reporting purposes, the company uses straight- line depreciation over a 5-year life. For tax purposes, the company uses the elective straight-line method over a 5-year life. (Hint: For tax purposes, the half-year convention as discussed in Appendix 10A must be used.) In January 2026, $219,000 is collected in advance rental of a building for a 3-year period. The entire $219,000 is reported as taxable income in 2026, but $146,000 of the $219,000 is reported as unearned revenue in 2026 for financial reporting purposes. The remaining amount of unearned revenue is to be recognized equally in 2027 and 2028. The tax rate is 20% in 2025 and all subsequent periods. (Hint: To find taxable income in 2025 and 2026, the related income taxes payable amounts will have to be "grossed up.") No temporary differences existed at the end of 2024. Sandhill expects to report taxable income in each of the next 5 years.
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