acc_423_week_5_individual_assignme...

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acc_423_week_5_individual_assignme...

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Gators CorporationGators Corporation2006Pretax Financial IncomeTemporary Difference(installment)Taxable IncomeTax Rate$130,00020072008$70,000$70,000($40,000) $20,000$20,000$90,00035%$90,00030%$90,00030%Income Tax Payable (current)$31,500$27,000$27,000Deferred Tax Expense(benefit)$14,000($6,000) ($6,000)Income Tax Expense (total)$45,500$21,000$21,000Journal Entries for 2006DebitDec. 31,2006Income Tax ExpenseCredit45,500Deferred Tax Liability14,000Income Tax Payable31,500Journal Entries for 2007DebitDec. 31, 2007Income Tax ExpenseDeferred Tax LiabilityIncome Tax PayableCredit21,0006,00027,000Journal Entries for 2008DebitDec. 31,2008Income Tax ExpenseDeferred Tax LiabilityIncome Tax PayableCredit21,0006,00027,000Installment SalesFinancial vsTaxableThe difference between reported revenue and collections on installment salesresults in a future tax liability. The sales revenue will be taxable as income whenthe money is collected from the customer.Deferred Tax Liability200620072008Temporary Difference$40,000$20,000$20,000Taxes (35%)$14,000$7,000$0$0($1,000)($1,000)$12,000$6,000$0Tax Change (30%)Deferred Tax Liability$60,000 in installment sales was reported as revenue in the financial statements in2006. Only $20,000 in cash was collected in 2006, creating a temporary difference and aresulting deferred taxliability. The

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