The information that follows pertains to Julia Company:
(a) Temporary differences for the year 2024 are summarized below.
Expenses deducted in the tax return, but not included in the income statement:
Depreciation $ 67,000
Prepaid expense 8,700
Expenses reported in the income statement, but not deducted in the tax return:
Warranty expense $ 9,700
(b) No temporary differences existed at the beginning of 2024.
(c) Pretax accounting income was $74,700 and taxable income was $8,700 for 2024.
(d) There were no permanent differences.
(e) The tax rate is 40%.
REQUIRED:
Prepare the journal entry to record the tax provision for 2024.
Note: If no entry is required for a transaction/event, select “No journal entry required” in the first account field.
Isaac Incorporated began operations in January 2024. For some property sales, Isaac recognizes income in the period of sale for financial reporting purposes. However, for income tax purposes, Isaac recognizes income when it collects cash from the buyer’s installment payments.
In 2024, Isaac had $655 million in sales of this type. Scheduled collections for these sales are as follows:
2024 $ 64 million
2025 124 million
2026 140 million
2027 155 million
2028 172 million
$ 655 million
Assume that Isaac has a 30% income tax rate and that there were no other differences in income for financial statement and tax purposes.
Suppose that, in 2025, legislation revised the income tax rates so that Isaac would be taxed in 2026 and beyond at 25%, rather than 30%. Assume that there were no other differences in income for financial statement and tax purposes. Ignoring operating expenses and additional sales in 2025, what deferred tax liability would Isaac report in its year-end 2025 balance sheet?
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