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On January 1, 2020, equipment

On January 1, 2020, equipment

FINANCIAL 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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1. 2. 3. 4. 5. (a) Year 2020 2021 Amount Due per Tax Return $128,400 109,000 On January 1, 2020, equipment costing $617,300 is purchased. For financial reporting purposes, the company uses straight-line depreciation over a 5-year life. For tax purposes, the company uses the elective straight-line method over a 5-year life. (Hint: For purposes, the half-year convention as discussed in Appendix 11A must be used.) In January 2021, $215,400 is collected in advance rental of a building for a 3-year period. The entire $215,400 is reported as taxable income in 2021, but $143,600 of the $215,400 is reported as unearned revenue in 2021 for financial reporting purposes. The remaining amount of unearned revenue is to be recognized equally in 2022 and 2023. The tax rate is 20% in 2020 and all subsequent periods. (Hint: To find taxable income in 2020 and 2021, the related income taxes payable amounts will have to be "grossed up!") No temporary differences existed at the end of 2019. Novak expects to report taxable income in each of the next 5 years. Determine the amount to report for deferred income taxes at the end of 2020, and indicate how it should be classified on the balance sheet. Amount to report for deferred income taxes $
Transcribed Image Text:1. 2. 3. 4. 5. (a) Year 2020 2021 Amount Due per Tax Return $128,400 109,000 On January 1, 2020, equipment costing $617,300 is purchased. For financial reporting purposes, the company uses straight-line depreciation over a 5-year life. For tax purposes, the company uses the elective straight-line method over a 5-year life. (Hint: For purposes, the half-year convention as discussed in Appendix 11A must be used.) In January 2021, $215,400 is collected in advance rental of a building for a 3-year period. The entire $215,400 is reported as taxable income in 2021, but $143,600 of the $215,400 is reported as unearned revenue in 2021 for financial reporting purposes. The remaining amount of unearned revenue is to be recognized equally in 2022 and 2023. The tax rate is 20% in 2020 and all subsequent periods. (Hint: To find taxable income in 2020 and 2021, the related income taxes payable amounts will have to be "grossed up!") No temporary differences existed at the end of 2019. Novak expects to report taxable income in each of the next 5 years. Determine the amount to report for deferred income taxes at the end of 2020, and indicate how it should be classified on the balance sheet. Amount to report for deferred income taxes $
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