Chapter 2, Problem 2.7P

Skysong Corp. sold an investment on an installment basis. The total gain of $74,400 was reported for financial reporting purposes in the period of sale. The company qualifies to use the installment-sales method for tax purposes. The installment period is 3 years; one-third of the sale price is collected in the period of sale. The tax rate was 40% in 2020, and 20% in 2021 and 2022. The 20% tax rate was not enacted in law until 2021. The accounting and tax data for the 3 years is shown below. Financial Accounting Tax Return 2020 (40% tax rate). Income before temporary difference $86,800 $86,800 Temporary difference 74,400 24,800 Income $161,200 $111,600 2021 (20% tax rate) Income before temporary difference $86,800 $86,800 Temporary difference 24,800 Income $86,800 $111,600 2022 (20% tax rate). Income before temporary difference $86,800 $86,800 Temporary difference 24,800 Income $86,800 $111,600 Calculate cumulative temporary differences for years 2020-2022. (Negative amounts using…

At the end of 2019, Framber Company received $8000 as a prepayment for renting a building to a tenant during 2020. The company erroneously recorded the transaction by debiting Cash and crediting Rent Revenue in 2019 instead of 2020. Upon discovery of this error in 2020, what correcting journal entry will Framber make? Ignore income taxes.

Sandhill Company has the following two temporary differences between its income tax expense and income taxes payable. Pretax financial income Excess depreciation expense on tax return Excess warranty expense in financial income Taxable income The income tax rate for all years is 20%. (a) 2025 $864,000 (30,400) 19,400 $853,000 2026 $917,000 (38,500) 10,100 $888,600 2027 $909,000 (9,800) 8,300 $907,500 Assuming there were no temporary differences prior to 2025, prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2025, 2026, and 2027. (List all debit entries before credit entries. 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 O for the amounts. Record journal entries in the order presented in the problem.)