Homework Help is Here – Start Your Trial Now!
Business
Accounting
Prepare the journal entries to record current and future income taxes for 2020. (Credit account titles

Prepare the journal entries to record current and future income taxes for 2020. (Credit account titles

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question
Cheyenne Services Ltd. follows ASPE and had earned accounting income before taxes of $493,000 for the year ended December 31 2020. During 2020, Cheyenne paid $82,000 for meals and entertainment expenses. In 2017, Cheyenne's tax accountant made a mistake when preparing the company's income tax return. In 2020, Cheyenne paid $10,400 in penalties related to this error. These penalties were not deductible for tax purposes. Cheyenne owned a warehouse building for which it had no current use, so the company chose to use the building as a rental property. At the beginning of 2020, Cheyenne rented the building to Trung Inc. for two years at $62,700 per year. Trung paid the entire two years' rent in advance. Cheyenne used the straight-line depreciation method for accounting purposes and recorded depreciation expense of $303,500. For tax purposes, Cheyenne claimed the maximum capital cost allowance of $453,900. This asset had been purchased at the beginning of the year for $3,024,000. In 2020, Cheyenne began selling its products with a two-year warranty against manufacturing defects. In 2020, Cheyenne accrued $308,400 of warranty expenses: actual expenditures for 2020 were $92,400 with the remaining $216,000 anticipated in 2021. In 2020, Cheyenne was subject to a 25% income tax rate. During the year, the federal government announced that tax rates would be decreased to 23% for all future years beginning January 1, 2021. Prepare the journal entries to record current and future income taxes for 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.)
Transcribed Image Text:Cheyenne Services Ltd. follows ASPE and had earned accounting income before taxes of $493,000 for the year ended December 31 2020. During 2020, Cheyenne paid $82,000 for meals and entertainment expenses. In 2017, Cheyenne's tax accountant made a mistake when preparing the company's income tax return. In 2020, Cheyenne paid $10,400 in penalties related to this error. These penalties were not deductible for tax purposes. Cheyenne owned a warehouse building for which it had no current use, so the company chose to use the building as a rental property. At the beginning of 2020, Cheyenne rented the building to Trung Inc. for two years at $62,700 per year. Trung paid the entire two years' rent in advance. Cheyenne used the straight-line depreciation method for accounting purposes and recorded depreciation expense of $303,500. For tax purposes, Cheyenne claimed the maximum capital cost allowance of $453,900. This asset had been purchased at the beginning of the year for $3,024,000. In 2020, Cheyenne began selling its products with a two-year warranty against manufacturing defects. In 2020, Cheyenne accrued $308,400 of warranty expenses: actual expenditures for 2020 were $92,400 with the remaining $216,000 anticipated in 2021. In 2020, Cheyenne was subject to a 25% income tax rate. During the year, the federal government announced that tax rates would be decreased to 23% for all future years beginning January 1, 2021. Prepare the journal entries to record current and future income taxes for 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.)
Expert Solution
steps

Step by step

Solved in 5 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Administration and Procedures
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS