E19.3 (LO 1, 2) (One Temporary Difference, Future Taxable Amounts, One Rate, Beginning Deferred Taxes) Brennan Corporation began 2022 with a $90,000 balance in the Deferred Tax Liability account. At the end of 2022, the related cumulative temporary difference amounts to $350,000, and it will reverse evenly over the next 2 years. Pretax accounting income for 2022 is $525,000, the tax rate for all years is 40%, and taxable income for 2022 is $400,000. Instructions a. Compute income taxes payable for 2022. b. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2022. c. Prepare the income tax expense section of the income statement for 2022, beginning with the line "Income before income taxes."

E19.3 (LO 1, 2) (One Temporary Difference, Future Taxable Amounts, One Rate, Beginning Deferred Taxes) Brennan Corporation began 2022 with a $90,000 balance in the Deferred Tax Liability account. At the end of 2022, the related cumulative temporary difference amounts to $350,000, and it will reverse evenly over the next 2 years. Pretax accounting income for 2022 is $525,000, the tax rate for all years is 40%, and taxable income for 2022 is $400,000. Instructions a. Compute income taxes payable for 2022. b. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2022. c. Prepare the income tax expense section of the income statement for 2022, beginning with the line "Income before income taxes."

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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Arndt, Inc. reported the following for 2021 and 2022 ($ in millions): 2021 2022 Revenues $ 888 $ 980 Expenses 760 800 Pretax accounting income (income statement) $ 128 $ 180 Taxable income (tax return) $ 116 $ 200 Tax rate: 25% Expenses each year include $30 million from a two-year casualty insurance policy purchased in 2021 for $60 million. The cost is tax deductible in 2021. Expenses include $2 million insurance premiums each year for life insurance on key executives. Arndt sells one-year subscriptions to a weekly journal. Subscription sales collected and taxable in 2021 and 2022 were $33 million and $35 million, respectively. Subscriptions included in 2021 and 2022 financial reporting revenues were $25 million ($10 million collected in 2020 but not recognized as revenue until 2021) and $33 million, respectively. Hint: View this as two temporary differences—one reversing in 2021; one originating in 2021. 2021…
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