Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Novotna Inc.s only temporary difference at the beginning and end of 2019 is caused by a $3,000,000 deferred gain for tax purposes for an installment

Novotna Inc.s only temporary difference at the beginning and end of 2019 is caused by a $3,000,000 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 $1,200,000. 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.

(a)

Correct answer iconYour answer is correct.

Determine the amount reported as a deferred tax liability at the end of 2019.

Deferred tax liability

$enter the amount reported as a deferred tax liability at the end of 2016 enter the amount reported as a deferred tax liability at the end of 2016

eTextbook and Media

List of Accounts

Attempts: 4 of 5 used

(b)

Prepare the journal entry necessary to adjust the deferred tax liability when the new tax rate is enacted into law. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

enter an account titleenter an account title

enter a debit amountenter a debit amount

enter a credit amountenter a credit amount

enter an account titleenter an account title

enter a debit amountenter a debit amount

enter a credit amountenter a credit amount

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

Auditing Principles Practice And Problems

Authors: Jagdish Prakash

1st Edition

9327244745, 978-9327244748

More Books

Students also viewed these Accounting questions