E16-25 Multiple tax rates; balance sheet classification
Case Development began operations in December 2011. When property is
sold on an installment basis, Case recognizes installment income for
financial reporting purposes in the year of the sale. For tax purposes,
installment income is reported by the installment method. 2011
installment income was $600,000 and will be collected over the next
three years. Scheduled collections and enacted tax rates for 2012-2014
are as follows:
2012 $150,000 30%
2013 250,000 40
2014 200,000 40
Pretax accounting income for 2011 was $810,000, which includes interest
revenue of $10,000 from municipal bonds. The enacted tax rate for 2011
is 30%.
Required:
1.Assuming no differences between accounting income and taxable income
other than those described above, prepare the appropriate journal entry
to record Case’s 2011 income taxes.
2.What is Case’s 2011 net income?
3.How should the deferred tax amount be classified in a classified balance sheet?
Click here for the solution: Case Development began operations in December 2011
