Button Company has the following two temporary differences between its income tax expense and income taxes payable. 2020 2021 2022 Pretax Financial Income $840,000 $910,000 $945,000 Excess Depreciation Expense on tax Return (30,000) (40,000) (10,000) Excess Warranty Expense in Financial Income 20,000 10,000 8,000 Taxable Income $830,000 $880,000 $943,000 The income tax rate is 20% for all years. Instructions: a) Assuming there were no temporary differences prior to 2020, prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020,2021, and 2022. b) Indicate how deferred taxes will be reported on the 2022 balance sheet. Button’s product warranty is for 12 months. Deferred tax asset ( $ 0 + $ 0 + $ 0 )..............................$ 0 Deferred tax liability ( $ 0 + $ 0 + $ 0 ).............................$ 0 Net non-current liability ( deferred tax liability ) ................$ 0 c) Prepare the income tax expense section of the income statement for 2022, beginning with the line “Pretax Financial Income”.
Button Company has the following two temporary differences between its income tax expense and income taxes payable. 2020 2021 2022 Pretax Financial Income $840,000 $910,000 $945,000 Excess Depreciation Expense on tax Return (30,000) (40,000) (10,000) Excess Warranty Expense in Financial Income 20,000 10,000 8,000 Taxable Income $830,000 $880,000 $943,000 The income tax rate is 20% for all years. Instructions: a) Assuming there were no temporary differences prior to 2020, prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020,2021, and 2022. b) Indicate how deferred taxes will be reported on the 2022 balance sheet. Button’s product warranty is for 12 months. Deferred tax asset ( $ 0 + $ 0 + $ 0 )..............................$ 0 Deferred tax liability ( $ 0 + $ 0 + $ 0 ).............................$ 0 Net non-current liability ( deferred tax liability ) ................$ 0 c) Prepare the income tax expense section of the income statement for 2022, beginning with the line “Pretax Financial Income”.
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter3: Taxes On The Financial Statements
Section: Chapter Questions
Problem 1P
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Question
Exercise 19.8 (Two Temporary Differences, One rate, 3 years).
Button Company has the following two temporary differences between its income tax expense and income taxes payable.
|
|
2020 |
2021 |
2022 |
|
Pretax Financial Income |
$840,000 |
$910,000 |
$945,000 |
|
Excess |
(30,000) |
(40,000) |
(10,000) |
|
Excess Warranty Expense in Financial Income |
20,000 |
10,000 |
8,000 |
|
Taxable Income |
$830,000 |
$880,000 |
$943,000 |
The income tax rate is 20% for all years.
Instructions:
- a) Assuming there were no temporary differences prior to 2020, prepare the
journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020,2021, and 2022.
- b) Indicate how
deferred taxes will be reported on the 2022 balance sheet. Button’s product warranty is for 12 months.
Net non-current liability ( deferred tax liability ) ................$ 0
- c) Prepare the income tax expense section of the income statement for 2022, beginning with the line “Pretax Financial Income”.
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