Dixon Development began operations in December 2024. When lots for industrial development are sold, Dixon recognizes income for financial reporting purposes in the year of the sale. For some lots, Dixon recognizes income for tax purposes when collected. Income recognized for financial reporting purposes in 2024 for lots sold this way was $10 million, which will be collected over the next three years. Scheduled collections for 2025-2027 are as follows: 2025 2026 2827 $ 4 million 4 million 2 million $ 10 million Pretax accounting income for 2024 was $15 million. The enacted tax rate is 30%. Required: 1. Assuming no differences between accounting income and taxable income other than those described above, prepare the journal entry to record income taxes in 2024. 2. Suppose a new tax law, revising the tax rate from 30% to 25%, beginning in 2026, is enacted in 2025, when pretax accounting income was $12 million. No 2025 lot sales qualified for the special tax treatment. Prepare the appropriate journal entry to record income taxes in 2025. 3. If the new tax rate had not been enacted, what would have been the appropriate balance in the deferred tax liability account at the end of 2025?
Dixon Development began operations in December 2024. When lots for industrial development are sold, Dixon recognizes income for financial reporting purposes in the year of the sale. For some lots, Dixon recognizes income for tax purposes when collected. Income recognized for financial reporting purposes in 2024 for lots sold this way was $10 million, which will be collected over the next three years. Scheduled collections for 2025-2027 are as follows: 2025 2026 2827 $ 4 million 4 million 2 million $ 10 million Pretax accounting income for 2024 was $15 million. The enacted tax rate is 30%. Required: 1. Assuming no differences between accounting income and taxable income other than those described above, prepare the journal entry to record income taxes in 2024. 2. Suppose a new tax law, revising the tax rate from 30% to 25%, beginning in 2026, is enacted in 2025, when pretax accounting income was $12 million. No 2025 lot sales qualified for the special tax treatment. Prepare the appropriate journal entry to record income taxes in 2025. 3. If the new tax rate had not been enacted, what would have been the appropriate balance in the deferred tax liability account at the end of 2025?
Chapter12: Tax Credits And Payments
Section: Chapter Questions
Problem 23P
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Transcribed Image Text:Dixon Development began operations in December 2024. When lots for industrial development are sold, Dixon recognizes income for
financial reporting purposes in the year of the sale. For some lots, Dixon recognizes income for tax purposes when collected. Income
recognized for financial reporting purposes in 2024 for lots sold this way was $10 million, which will be collected over the next three
years. Scheduled collections for 2025-2027 are as follows:
2025
2026
2827
$ 4 million
4 million
2 million
$ 10 million
Pretax accounting income for 2024 was $15 million. The enacted tax rate is 30%.
Required:
1. Assuming no differences between accounting income and taxable income other than those described above, prepare the journal
entry to record income taxes in 2024.
2. Suppose a new tax law, revising the tax rate from 30% to 25%, beginning in 2026, is enacted in 2025, when pretax accounting
income was $12 million. No 2025 lot sales qualified for the special tax treatment. Prepare the appropriate journal entry to record
income taxes in 2025.
3. If the new tax rate had not been enacted, what would have been the appropriate balance in the deferred tax liability account at
the end of 2025?
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