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Cruse Corporation started operations on January 1 of Year 1 . Taxable income from the...

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Accounting

image Cruse Corporation started operations on January 1 of Year 1 . Taxable income from the tax return is $2,850,000. Income tax rate is 25%. There were no beginning balances in deferred tax accounts. Additional information On December 31 of Year 1, GAAP basis of installment sale receivables, $330,000; tax basis, $0. Receivables will be collected equally over Year 2, Year 3, and Year 4. On December 31 of Year 1, GAAP basis of litigation accrual, $270,000; tax basis, $0. Management expects the litigation loss to be recorded in the tax return in Year 4 Required a. Prepare schedules to compute the deferred tax balances on December 31 of Year 1. b. Record the income tax journal entry on December 31 of Year 1. c. Record the income tax journal entry on December 31 of Year 1 for each of the following separate situations. 1. Taxable income is $1,650,000 for Year 1 . 2. Deferred tax liability had a January 1 of Year 1 balance of $50,000 instead of $0. 3. Deferred tax asset had a January 1 of Year 1 balance of $28,000 instead of $0. 4. Litigation loss was estimated at $170,000 instead of $270,000. 5. GAAP basis of installment sales receivables was $440,000 instead of $330,000

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