The following differences enter into the reconciliation of financial income and taxable income of Karmanos Company for the year ended December 31, 2020, its first year of operations. The enacted income tax rate is 20% for all years. Pretax accounting income Excess tax depreciation Litigation accrual Unearned rent revenue deferred on the books but appropriately recognized in taxable income Interest income from New York municipal bonds Taxable income $800,000 (480,000) 70,000 Instruction's 60,000 (20,000) $430,000 1. Excess tax depreciation will reverse equally over a four-year period, 2021-2024. 2. It is estimated that the litigation liability will be paid in 2024. 3. Rent revenue will be recognized during the last year of the lease, 2024. 4. Interest revenue from the New York bonds is expected to be $20,000 each year until their maturity at the end of 2024. (a) Prepare a schedule of future taxable and (deductible) amounts. (b) Prepare a schedule of the deferred tax (asset) and liability at the end of 2020.

The following differences enter into the reconciliation of financial income and taxable income of Karmanos Company for the year ended December 31, 2020, its first year of operations. The enacted income tax rate is 20% for all years. Pretax accounting income Excess tax depreciation Litigation accrual Unearned rent revenue deferred on the books but appropriately recognized in taxable income Interest income from New York municipal bonds Taxable income $800,000 (480,000) 70,000 Instruction's 60,000 (20,000) $430,000 1. Excess tax depreciation will reverse equally over a four-year period, 2021-2024. 2. It is estimated that the litigation liability will be paid in 2024. 3. Rent revenue will be recognized during the last year of the lease, 2024. 4. Interest revenue from the New York bonds is expected to be $20,000 each year until their maturity at the end of 2024. (a) Prepare a schedule of future taxable and (deductible) amounts. (b) Prepare a schedule of the deferred tax (asset) and liability at the end of 2020.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The pretax financial income of Tamarisk Company differs from its taxable income throughout each of 4 years as follows. Year PretaxFinancial Income Taxable Income Tax Rate 2020 $295,000 $180,000 35 % 2021 320,000 217,000 20 % 2022 335,000 264,000 20 % 2023 435,000 592,000 20 % Pretax financial income for each year includes a nondeductible expense of $29,300 (never deductible for tax purposes). The remainder of the difference between pretax financial income and taxable income in each period is due to one depreciation temporary difference. No deferred income taxes existed at the beginning of 2020. Prepare the Income stmt for 2021 beginning with income before income taxes
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