9*10

Times-Roman Publishing Company reports the following amounts in its first three years of operation: ($ in 000s) Pretax accounting income Taxable income 2018 2019 2020 S340 $320 $310 380 330 350 The difference between pretax accounting income and taxable income is due to subscription revenue for one-year magazine subscriptions being reported for tax purposes in the year received, but reported in the income statement in later years when the performance obligation is satisfied. The income tax rate is 40% each year. Times-Roman anticipates profitable operations in the future. Required: 1. What is the balance sheet account for which a temporary difference is created by this situation? 2. For each year, indicate the cumulative amount of the temporary difference at year-end. (Enter your answers in thousands.) 3. Determine the balance in the related deferred tax account at the end of each year. Is it a deferred tax asset or a deferred tax liability? (Enter your answers in thousands.) What is the balance sheet account for which a temporary 1 difference is created by this situation? Deferred subscription revenue December 31 2018 2019 2020 2. Temporary difference Deferred tax asset 3. Dixon Development began operations in December 2018. When lots for industrial development are sold, Dixon 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 2018 for lots sold this way was $26 million, which will be collected over the next three years. Scheduled collections for 2019-2021 are as follows: $ 6 million 2019 2020 12 million 8 million 2021 $26 million Pretax accounting income for 2018 was $36 million. The enacted tax rate is 45% Assuming no differences between accounting income and taxable income other than those described above, prepare the journal entry to record income taxes in 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).) View transaction list View journal entry worksheet ..u General Journal No Date Debit Credit 1 Dec 31, 2018 Income tax expense Deferred tax liability Income tax payable Suppose a new tax law, revising the tax rate from 45% to 40 %, beginning in 2020, is enacted in 2019, when pretax accounting income was $30 million. No 2019 lot sales qualified for the special tax treatment. Prepare the appropriate journal entry to record income taxes in 2019. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).) Show less A View transaction list View journal entry worksheet No Date General Journal Debit Credit 1 Dec 31, 2019 Income tax expense Deferred tax liability Income tax payable 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 2019? (Enter your answer in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).) Balance in the deferred tax liability million