Motown Corporation enters into an installment sale with Max Corporation in 20X2. Motown recognizes the sale on an accrual basis (when sale is complete) for book purposes and on an installment sale method (cash) basis for tax purposes. Facts are as follows:

Initial Year of installment sale: 20X2

Revenue ..................Recognition

Book    ..................Tax

20X2 ..................136,750

20X3 ..................50%

20X4 ..................50%

Tax Rate ...........20%

Book ..................Income

20X2 .............$    186,755

20X3 ..............$    39,427

20X4 ...............$ 122,400

1.) Calculate taxable income for 20X2.

2.) Calculate taxes payable for 20X2.

3.) Determine the current deferred tax liability at 12/31/X2.

4.) calculate total income tax expense for 20X2.

5.) Compute net income after taxes for 20X2.

6.) Calculate taxable income for 20X3.

7.) The entry required at the end of 20X3 requires:

A. Debit to the Deferred tax liability for 7,885 $

B. Debit to the Deferred tax liability for 13,675 $

C. Debit to the Deferred tax liability for 21,560 $

D. Credit to the Deferred tax liability for 7,885 $

E. Credit to the Deferred tax liability for 13,675 $

F. Credit to the Deferred tax liability for 21,560 $

G. None of the above

8.) Compute net income after taxes for 20X3.

9.) Calculate taxable income for 20X4.

10.) Compute net income after taxes for 20X4.

Answer rating: 100% (QA)

2002 2003 2004 Book Income 186755 39427 122400 Tax Adjustment 50 136750 6837... View the full answer