Question
DeJohn Company, which began operations at the beginning of 2012, produces various products on a contract basis. Each contract generates a gross profit of $80,000.
DeJohn Company, which began operations at the beginning of 2012, produces various products on a contract basis. Each contract generates a gross profit of $80,000. Some of DeJohn's contracts provide for the customer to pay on an installment basis. Under these contracts, DeJohn collects one-fifth of the contract revenue in each of the following four years. For financial reporting purposes, the company recognizes gross profit in the year of completion (accrual basis). For tax purposes,DeJohn recognizes gross profit in the year cash is collected (installment basis).
Presented below is information related to DeJohn's operations for 2014:
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Accounting Prepare the journal entry to record income taxes for 2014. |
Analysis Classify deferred income taxes on the balance sheet at December 31, 2014, and indicate, starting with Income before income taxes, how income taxes are reported on the income statement. What is DeJohn's effective tax rate? |
Principles Explain how the conceptual framework is used as a basis for determining the proper accounting for deferred income taxes. |
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