Gators Corp. sold an investment on an installment basis. The total gain of $60,000 was reported for

Question:

Gators Corp. sold an investment on an installment basis. The total gain of $60,000 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 35% in 2007, and 30% in 2008 and 2009. The 30% tax rate was not enacted in law until 2008. The accounting and tax data for the 3 years is shown below.

Instructions
(a) Prepare the journal entries to record the income tax expense, deferred income taxes, and the income tax payable at the end of each year. No deferred income taxes existed at the beginning of 2007.
(b) Explain how the deferred taxes will appear on the balance sheet at the end of each year. (Assume the Installment Accounts Receivable is classified as a current asset.)
(c) Draft the income tax expense section of the income statement for each year, beginning with €œIncome before incometaxes.€

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...