Multiple tax rates; balance sheet classification (L016-1, 16-4, 16-5, 16-8] Q3. Case Development began operations in December 2021. 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. 2021 installment income was $798,000 and will be collected over the next three years. Scheduled collections and enacted tax rates for 2022 2024 are as follows: 2022 2023 2024 $250,000 304,000 244,000 20% 25 25 Case also had product warranty costs of $203,000 expensed for financial reporting purposes in 2021. The $203,000 warranty expense will be deducted for tax purposes when paid over the next three years as follows: 2022 2023 2024 $75,000 68,000 60,000 Pretax accounting income for 2021 was $961,000, which includes interest revenue of $21,000 from municipal bonds. The enacted tax rate for 2021 is 20%. | 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 2021 income taxes. Future Taxable Deferred Tax (Deductible) Amounts Current year Liability Assets 2021 2022 2023 2024 Pretax Accounting Income Non-temporary difference: Municipal Bond Interest revenue Temporary difference: Installment sales Warranty expense Taxable income Enacted tax rate 20% 20% 25% 25% Income Tax payable (step 1) Deferred tax liability sum 3 yrs Deferred tax asset sum 3 yos step 2,3 Deferred Tax Liability Assets Ending balances (calculated as above): Less: beginning balances 0 0 Change needed to achieve desired balances step 3 Note: The above is the worksheet to help you to do the calculation. Fill in those shaded cells. Please refer to llustration 16-48 for warranty expense, Illustration 16-11 for permanent difference, installment sales, and different tax rates. Joumal entry (follow step 1, 2, 3, and 4 when calculate the interest expense, refer to ilustration 16-12A) 2. What is Case's 2021 net income? 3. How should the deferred tax amount be classified in a classified balance sheet? (refer to page 941) Multiple tax rates; balance sheet classification (L016-1, 16-4, 16-5, 16-8] Q3. Case Development began operations in December 2021. 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. 2021 installment income was $798,000 and will be collected over the next three years. Scheduled collections and enacted tax rates for 2022 2024 are as follows: 2022 2023 2024 $250,000 304,000 244,000 20% 25 25 Case also had product warranty costs of $203,000 expensed for financial reporting purposes in 2021. The $203,000 warranty expense will be deducted for tax purposes when paid over the next three years as follows: 2022 2023 2024 $75,000 68,000 60,000 Pretax accounting income for 2021 was $961,000, which includes interest revenue of $21,000 from municipal bonds. The enacted tax rate for 2021 is 20%. | 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 2021 income taxes. Future Taxable Deferred Tax (Deductible) Amounts Current year Liability Assets 2021 2022 2023 2024 Pretax Accounting Income Non-temporary difference: Municipal Bond Interest revenue Temporary difference: Installment sales Warranty expense Taxable income Enacted tax rate 20% 20% 25% 25% Income Tax payable (step 1) Deferred tax liability sum 3 yrs Deferred tax asset sum 3 yos step 2,3 Deferred Tax Liability Assets Ending balances (calculated as above): Less: beginning balances 0 0 Change needed to achieve desired balances step 3 Note: The above is the worksheet to help you to do the calculation. Fill in those shaded cells. Please refer to llustration 16-48 for warranty expense, Illustration 16-11 for permanent difference, installment sales, and different tax rates. Joumal entry (follow step 1, 2, 3, and 4 when calculate the interest expense, refer to ilustration 16-12A) 2. What is Case's 2021 net income? 3. How should the deferred tax amount be classified in a classified balance sheet? (refer to page 941)
