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Drake Appliance Company, an accrual basis taxpayer, sells home appliances and service contracts. Determine the effect of each of the following transac-tions on the company’s 2019 gross income assuming that the company uses any available options to defer its taxes.a. In December 2018, the company received a $1,200 advance payment from a customer for an appliance that Drake special ordered from the manufacturer. The appliance did not arrive from the manufacturer until January 2019, and Drake immediately delivered it to the customer. The sale was reported in 2019 for financial accounting purposes.b. In October 2019, the company sold a 6-month service contract for $240. The company also sold a 36-month service contract for $1,260 in July 2019.c. On December 31, 2019, the company sold an appliance for $1,200. The company received $500 cash and a note from the customer for $700 and $260interest, to be paid at the rate of $40 a month for 24 months. Because of the customer’s poor credit record, the fair market value of the note was only $600. The cost of the appliance was $750.
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- Since the SUTA rates changes are made at the end of each year, the available 2019 rates were used for FUTA and SUTA. Note: For this textbook edition the rate 0.6% was used for the FUTA tax rate for employers. Example 5-8 The Iqbal Company of Georgia had a FUTA taxable payroll of $215,600 and a SUTA taxable payroll of $255,700 with a 5.6 percent SUTA tax rate. The company would pay unemployment taxes of: FUTA $215,600 × 0.006 = $1,293.60 SUTA $255,700 × 0.056 = 14,319.20 Total taxes $15,612.80 Kresloff Company has only two employees and is located in a state that has set an unemployment tax for the company of 4.8 percent on the first $12,000 of each employee’s earnings. Both employees are paid the same amount each week ($900) and have earned $11,500 up to this week’s pay. The unemployment taxes that the company must pay for this week’s pay would be $48.FUTA tax (both over $7,000) = $0.00SUTA tax ($1,000 × 0.048) = $48.00($500 of each employee’s pay is under the state…arrow_forwardIn 2021, DFS Medical Supply collected rent revenue for 2022 tenant occupancy. For income tax reporting, the rent is taxed when collected. For financial statement reporting, the rent is recorded as deferred revenue and then recognized as revenue in the period tenants occupy the rental property. The deferred portion of the rent collected in 2021 amounted to $390,000 at December 31, 2021. DFS had no temporary differences at the beginning of the year.Required:Assuming an income tax rate of 25% and 2021 income tax payable of $940,000, prepare the journal entry to record income taxes for 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 1. record 2021 income taxes 2.arrow_forwardMini, Inc., earns pretax book net income of $1,828,000 in 2018. Mini deducted $190,400 in bad debt expense for book purposes. This expense is not yet deductible for tax purposes.Mini reports $1,919,400 of pretax book net income in 2019. Mini did not deduct any bad debt expense for book purposes in 2019 but did deduct $142,800 in bad debt expense for tax purposes. Mini reports no other temporary or permanent differences. Assuming that the pertinent U.S. Federal corporate income tax rate is 21%, and Mini earns an after-tax rate of return on capital of 8%. a. The 2019 end-of-year balance in Mini’s deferred tax asset and deferred tax liability balance sheet accounts. If an amount is zero, enter "0". If required, round your answer to nearest whole value. 2019 a. Deferred tax asset account balance ______ b. Deferred tax liability account balance ______ b. The cost to Mini of the deferral of the bad debt deduction, considering the time value of money. Mini earns an…arrow_forward
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