PROBLEM: Continuing with Example 17.4, assume that Otis Optics collected the $60,000 of installment sales receivable in 2019. This amount is taxable income because it is collected in cash. Otis already had recorded book income for installment sales in 2018 along with the related installment sales receivable, so no book income is recognized in the year of cash collection. In addition, Otis recorded $200,000 of regular sales on account during 2019. Ignore cost of goods sold. Assume no operating expenses in 2019. Determine the difference in the book carrying value and tax basis of the account receivable from the installment sale and compute the deferred tax liability. What is the journal entry to record income taxes for the year?
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