In 2018, Ryan Management collected rent revenue for 2019 tenant occupancy. For f
ID: 2510053 • Letter: I
Question
In 2018, Ryan Management collected rent revenue for 2019 tenant occupancy. For financial reporting, the rent is recorded as deferred revenue and then recognized as income in the period tenants occupy rental property, but for income tax reporting it is taxed when collected. The deferred portion of the rent collected in 2018 was $60 million. Taxable income is $180 million. No temporary differences existed at the beginning of the year, and the tax rate is 40%. Suppose the deferred portion of the rent collected was $50 million at the end of 2019. Taxable income is $200 million.
Prepare the appropriate journal entry to record income taxes.
Explanation / Answer
Solution:
Journal Entries - Ryan Management Date Particulars Debit (In million) Credit (In million) 2018 Income Tax Expense Dr $48.00 Deferred Tax Assets Dr ($60*40%) $24.00 To Income Tax Payable ($180*40%) $72.00 (Being income tax and deferred tax recorded for 2018) 2019 Income Tax Expense Dr $84.00 To Income Tax Payable ($200*40%) $80.00 To Deferred Tax Assets ($10*40%) $4.00 (Being income tax and deferred tax recorded for 2019)