Recording Multiple Temporary Differences
The following annual information is available for Rapper Inc.
● Taxable income: $115,000
● Tax rate: 25%
● Accounts receivable on installment sales
— GAAP basis: $150,000
— Tax basis: $0
● Deferred revenue on services
— GAAP basis: $35,000
— Tax basis: $0
● No deferred tax balances at beginning of the year
Please answer the following questions and show your work
a. Record the income tax journal entry on December 31.(Note: If a line in a journal entry isn’t required for the transaction, select “N/A” as the account names and leave the Dr. and Cr. answers blank (zero))
Image transcription text
Date Account Name Dr. Cr. Dec. 31 V V V V To record income tax expense
b. Compute pretax GAAP income