Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

E19.14 (LO 1, 2, 4) (Deferred Tax Liability, Change in Tax Rate, Prepare Section of Income Statement) Novotna Inc.'s only temporary difference at the beginning

E19.14 (LO 1, 2, 4) (Deferred Tax Liability, Change in Tax Rate, Prepare Section of Income Statement) Novotna Inc.'s only temporary difference at the beginning and end of 2019 is caused by a $3 million 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 $900,000. 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 $5,000,000, and taxable income is expected in all future years. Instructions a. Determine the amount reported as a deferred tax liability at the end of 2019. Indicate proper classification(s). b. Prepare the journal entry (if any) necessary to adjust the deferred tax liability when the new tax rate is enacted into law. c. 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.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Front Office Operations And Auditing Workbook

Authors: Patrick J. Moreo, Gail Sammons, Jeff Beck

2nd Edition

0130324930, 978-0130324931

More Books

Students also viewed these Accounting questions

Question

2. Do the same for your favorite female film character.

Answered: 1 week ago

Question

Design a health and safety policy.

Answered: 1 week ago