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Spartan Co. began operations in December 2024. For financial reporting purposes, Spartan recognizes income in...

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Accounting

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Spartan Co. began operations in December 2024. For financial reporting purposes, Spartan recognizes income in the year of the sale. For tax purposes, Spartan recognizes income when sales are collected from costumers. Income recognized for financial reporting purposes in 2024 was \$12 million, which will be collected over the next three years. Scheduled collections for 2025 2027 are as follows: Pretax accounting income for 2024 was $16 million. The enacted tax rate is 25%. Required: 1. Assuming no differences between accounting income and taxable income other than those described above, prepare the journal entry to record income taxes in 2024. 2. Suppose a new tax law, revising the tax rate from 25% to 20%, beginning in 2026 , is enacted in 2025, when pretax accounting income was \$20 million. No 2025 lot sales qualified for the special tax treatment. Prepare the appropriate journal entry to record income taxes in 2025 . 3. If the new tax rate had not been enacted, what would have been the appropriate balance in the deferred tax liability account at the end of 2025? Why

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