J-Matt, Inc., had pretax accounting income of $329,000 and taxable income of $372,000 in 2021. The only difference betweenaccounting and taxable income is estimated product warranty costs of $43,000 for sales in 2021. Warranty payments are expected tobe in equal amounts over the next three years (2022-2024) and will be tax deductible at that time. Recent tax legislation will changethe tax rate from the current 25% to 20% in 2023.Determine the amounts necessary to record J-Matt's income taxes for 2021 and prepare the appropriate journal entry.

Accounting income is the total amount of money that a business has made using defined accounting…

Answered: J-Matt, Inc., had pretax accounting…

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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Sheridan Corporation reported $230000 in revenues in its 2021 financial statements, of which $91100 will not be included in the tax return until 2022. The enacted tax rate is 40% for 2021 and 35% for 2022. What amount should Sheridan report for deferred income tax liability in its balance sheet at December 31, 2021? O $55560 O $48615 O $36440 O $31885
At the beginning of 2021, Pitman Co. had pretax financial income of $1,200,000. Additionally, there was a timing difference of $300,000 due to an accounts receivable that will not be collected until the following year. The tax rate us 30%. A. Calculate the total taxable income for 2021. B. Calculate Income tax expense, income tax payable, and the deferred amount for 2021, and create the journal entry.
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In 2021, Ryan Management collected rent revenue for 2022 tenant occupancy. For financial reporting, the rent is recorded as deferred revenue and then recognized as revenue in the period tenants occupy rental property. For tax reporting, the rent is taxed when collected in 2021. The deferred portion of the rent collected in 2021 was $194.0 million. No temporary differences existed at the beginning of the year, and the tax rate is 25%. Suppose the deferred portion of the rent collected was $76 million at the end of 2022. Taxable income is $760 million. Prepare the appropriate journal entry to record income taxes in 2022. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)
Shwonson Industries reported a deferred tax asset of $5.50 million for the year ended December 31, 2020, related to a temporary difference of $22 million. The tax rate was 25%. The temporary difference is expected to reverse in 2022, at which time the deferred tax asset will reduce taxable income. There are no other temporary differences in 2020-2022. Assume a new tax law is enacted in 2021 that causes the tax rate to change from 25% to 15% beginning in 2022. (The rate remains 25% for 2021 taxes.) Taxable income in 2021 is $32 million. Required: 1. Prepare the appropriate journal entry to record Shwonson's income tax expense in 2021. 2. What effect, will enacting the change in the 2022 tax rate, have on Shwonson's 2021 net income? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the appropriate journal entry to record Shwonson's income tax expense in 2021. (If no entry is required for a transaction/event, select "No journal entry…
At the beginning of 2020, Wertz Construction Company changed from the completed-contract method to recognizing revenue over time (percentage-of-completion) for financial reporting purposes. The company will continue to use the completed- contract method for tax purposes. For years prior to 2020, pretax income under the two methods was as follows: percentage-of- completion $120,000, and completed-contract $80,000. The tax rate is 20%. Prepare Wertz's 2020 journal entry to record the change in accounting principle.
At the end of 2021, a company has a deferred tax asset with a balance of $480,000.The company has a valuation allowance account related to the deferred tax asset. The valuation account has a balance of $205,000 at the beginning of 2021. If it is more likely than not that all of the deferred tax asset will be realized, then (enter the number that represents the correct answer): income tax expense will be debited by $205,000. income tax expense will be credited by $205,000. deferred tax asset will be debited by $275,000 the valuation account will be credited by $205,000.
Oriole Corporation recorded warranty accruals as at December 31, 2023, in the amount of $154,000. This reversing difference will cause deductible amounts of $50,300 in 2024, $38,200 in 2025, and $65,500 in 2026. No other reversing difference exists. Oriole's accounting income is $166,000 in each of 2024 and 2025 and the tax rate is 25% for all years. The warranty expenditures occurred as expected. There are no deferred tax accounts at the beginning of 2023. (a) Calculate the deferred tax balances at December 31, 2024 and 2025. Deferred tax eTextbook and Media List of Accounts. 2024 2025
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Improved Shoes Company recorded book income of $100,000 in 2020. It does not have any permanent differences, and the only temporary difference relates to a $75,000 installment sale that it recorded for book purposes. Improved Shoes anticipates collecting the installment sales equally over the following 2 years. The current enacted tax rate is 40%. The substantively enacted tax rates for the following 3 years are 42%, 45%, and 45%, respectively. What deferred tax amount should Improved Shoes record for this temporary difference under U.S. GAAP? The book basis of the installment sales receivable from the installment sales is rate Improved Shoes Company will use to calculate the deferred tax amount is record a deferred tax- in the amount of than the tax basis of the asset. The tax Therefore, Improved Shoes will
Crane Corporation has one temporary difference at the end of 2020 that will reverse and cause taxable amounts of $56,200 in 2021, $61,000 in 2022, and $66,500 in 2023. Crane’s pretax financial income for 2020 is $285,200, and the tax rate is 30% for all years. There are no deferred taxes at the beginning of 2020. Prepare the income tax expense section of the income statement for 2020, beginning with the line “Income before income taxes.”. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Crane CorporationIncome Statement (Partial)choose the accounting period Income before income taxes $285,200 select an opening section name select an income statement item $enter a dollar amount…
Shwonson Industries reported a deferred tax asset of $9.75 million for the year ended December 31, 2020, related to a temporary difference of $39 million. The tax rate was 25%. The temporary difference is expected to reverse in 2022, at which time the deferred tax asset will reduce taxable income. There are no other temporary differences in 2020–2022. Assume a new tax law is enacted in 2021 that causes the tax rate to change from 25% to 15% beginning in 2022. (The rate remains 25% for 2021 taxes.) Taxable income in 2021 is $49 million. Required:1. Prepare the appropriate journal entry to record Shwonson’s income tax expense in 2021.2. What effect, will enacting the change in the 2022 tax rate, have on Shwonson’s 2021 net income?

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