Question

6:34 @ . @ @ Pronghorn Inc's only temporary difference at the beginning and end of 2019 is caused by a $3,030,000 deferred gain for tax purposes for an installment sale of a plant asset, and the related receivable (only one half of which is classified as a current asset) is due in equal installments in 2020 and 2021. The related deferred tax liability at the beginning of the year is $1,212.000. In the third quarter of 2019, a new tax rate of 20% is enacted into law and is scheduled to become effective for 2021 Taxable income for 2019 is $5,050,000, and taxable income is expected in all future years. Determine the amount reported as a deferred tax liability at the end of 2019. GE Prepare the journal entry necessary to adjust the deferred tax liability when the new tax rate is enacted into law. (Credit account tities are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account tities and enter for the amounts.) And Bloom Draft the income tax expense portion of the income statement for 2019. Begin with the line"Income before income taxes." Assume no permanent differences exist. (Enter negative amounts using either a negative sign preceding the number eg.-45 or parentheses eg (451

Answer 1

Page: No ① Answers Deberred tag liability at the end of 2019 Deberned Ham liability on 2020 - [3020000] * * 30,000 1212000 = 1515000 X 40% = $ 606,000 Debbrred tax liability on 3021 = (30230,000 x 20 . L. - 1515000 X 20* = $ 303,000 Deberred tax liability at the end of 2019 * 606000 + 30 3000 € $909000 © Deberred tax liability at the end of 2019 = $909000 Journal embay Deterred tax expense = 12/2000 - 909000 = $303000

Page No ③ Particular Debit Credit Debeurd tax liability Deberreol fax expense $303,000 :- $ 303,000 w Amount Amount $5050,000 © Income statement Particus) Leo 2019 Particular Procome before income taxes Income tax expenses Current tax @ 40% $2020,000 Adjunt ment for change in tax rate (te 303000) 1. Net income (#1414000) $ 3,333,000 Current fax @ 40% = 5050,000 X 40% = $ 2020,000