Reference no: EM13485476
Comet Industries, Inc. began operations in 2010. One of the products it sells is pre-fabricated warehouse buildings on an installment plan. For these sales, Comet reports the entire amount of installment income in its financial accounting records in the year of sale. However, in its income tax return Comet reports installment income by the installment method. Installment income in 2010 was $57,000, which Comet expects to collect equally over three years (i.e., 2011, 2012, and 2013).
Another part of Comet's operations is renting out warehouse buildings in a business park it owns. During 2010, Comet collected $45,000 related to rent earned on these buildings. For income tax reporting purposes, this rent is taxed when collected. For financial reporting purposes, the rent is recognized as income in the period earned. At the end of 2010, the unearned portion of the rent collected during 2010 amounted to $20,000. This $20,000 will be earned in 2011.
Comet's pretax accounting income for 2010 is $172,000. $14,000 of this amount is interest revenue from an investment in municipal bonds (NOTE: non-temporary difference). There were no other differences between accounting income and taxable income other than those described above. The 2010 tax rate is 30%.
NEW INFORMATION: Assume Comet's pretax accounting income for 2011 is $232,000. The tax rate for 2011 remained at 30%, but based on an enacted law it is scheduled to become 35% in 2012 and all years beyond. No new temporary differences were created in 2011. Interest revenue from the investment in municipal bonds was $15,000 for 2011.
What is the appropriate journal entry to record Comet's 2011 income taxes? Indicate your answer by filling in as many of the following response items below as needed to complete the journal entry (NOTE: You may not need all response items to complete the entry). Additionally, provide well-labeled calculations of your amounts in the textbox provided below.
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37.Show your labeled calculations in the text box below: