on April 2,2020 a corporation with a December 31 taxation year purchased a 3- year investment certificate for $20,000. the certificates pay interest only at the end of the 3 years term, but interest is compounded annually at the rate of 10%. currently, the corporation's marginal tax rate is 28%, however, in 2021 the marginal tax rate will decrease to 25%. AN INDIVIDUAL MAKES THE IDENTICAL INVESTMENT ON APRIL 1, 2020. THE INDIVIDUAL MARGINAL TAX RATE IS ALSO 28% IN 2020 AND IS EXPECTED TO DECREASE TO 25% IN 2021. REQUIRED : CALCULATE AND COMPARE THE TAX ON THE INTREST INCOME FOR THE 3 YEARS PERIOD FOR THE INDIVIDUAL AND CORPORATION,.

on April 2,2020 a corporation with a December 31 taxation year purchased a 3- year investment certificate for $20,000. the certificates pay interest only at the end of the 3 years term, but interest is compounded annually at the rate of 10%. currently, the corporation's marginal tax rate is 28%, however, in 2021 the marginal tax rate will decrease to 25%. AN INDIVIDUAL MAKES THE IDENTICAL INVESTMENT ON APRIL 1, 2020. THE INDIVIDUAL MARGINAL TAX RATE IS ALSO 28% IN 2020 AND IS EXPECTED TO DECREASE TO 25% IN 2021. REQUIRED : CALCULATE AND COMPARE THE TAX ON THE INTREST INCOME FOR THE 3 YEARS PERIOD FOR THE INDIVIDUAL AND CORPORATION,.

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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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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Shwonson Industries reported a deferred tax asset of $5 million for the year ended December 31, 2020, related to a temporary difference of $20 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 $30 million.Required:Determine the effect of the tax rate change and prepare the appropriate journal entry to record Shwonson’s income tax expense in 2021. What effect, if any, will enacting the change in the 2022 tax rate have on Shwonson’s 2021 net income?
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