Pronghorn Enterprises Ltd., a private company following ASPE earned accounting income before taxes of $1,730,000 for the year ended December 31, 2020. During 2020, Pronghorn paid $220,000 for meals and entertainment expenses. In 2017, Pronghorn's tax accountant made a mistake when preparing the company's income tax return. In 2020, Pronghorn paid $19,000 in penalties related to this error. These penalties were not deductible for tax purposes. Pronghorn 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, Pronghorn rented the building to SPK Inc. for two years at $251,000 per year. SPK paid the entire two years' rent in advance. Pronghorn used the straight-line depreciation method for accounting purposes and recorded depreciation expense of $396,000. For tax purposes, Pronghorn claimed the maximum capital cost allowance of $621,000. Pronghorn began to sell its products with a two-year warranty against manufacturing defects in 2020 to match a warranty introduced by its main competitor. In 2020, Pronghorn accrued $590,000 of warranty expenses: actual expenditures for 2020 were $281,000 with the remaining $309,000 anticipated in 2021. In 2020, Pronghorn was subject to a 35% income tax rate. During the year, the federal government announced that tax rates would be decreased to 33% 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 ntcl
Pronghorn Enterprises Ltd., a private company following ASPE earned accounting income before taxes of $1,730,000 for the year ended December 31, 2020. During 2020, Pronghorn paid $220,000 for meals and entertainment expenses. In 2017, Pronghorn's tax accountant made a mistake when preparing the company's income tax return. In 2020, Pronghorn paid $19,000 in penalties related to this error. These penalties were not deductible for tax purposes. Pronghorn 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, Pronghorn rented the building to SPK Inc. for two years at $251,000 per year. SPK paid the entire two years' rent in advance. Pronghorn used the straight-line depreciation method for accounting purposes and recorded depreciation expense of $396,000. For tax purposes, Pronghorn claimed the maximum capital cost allowance of $621,000. Pronghorn began to sell its products with a two-year warranty against manufacturing defects in 2020 to match a warranty introduced by its main competitor. In 2020, Pronghorn accrued $590,000 of warranty expenses: actual expenditures for 2020 were $281,000 with the remaining $309,000 anticipated in 2021. In 2020, Pronghorn was subject to a 35% income tax rate. During the year, the federal government announced that tax rates would be decreased to 33% 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 ntcl
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Pronghorn Enterprises Ltd., a private company following ASPE earned accounting income before taxes of $1,730,000 for the year
ended December 31, 2020.
During 2020, Pronghorn paid $220,000 for meals and entertainment expenses.
In 2017, Pronghorn's tax accountant made a mistake when preparing the company's income tax return. In 2020, Pronghorn paid
$19,000 in penalties related to this error. These penalties were not deductible for tax purposes.
Pronghorn 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, Pronghorn rented the building to SPK Inc. for two years at $251,000 per year. SPK paid the
entire two years' rent in advance.
Pronghorn used the straight-line depreciation method for accounting purposes and recorded depreciation expense of $396,000. For
tax purposes, Pronghorn claimed the maximum capital cost allowance of $621,000.
Pronghorn began to sell its products with a two-year warranty against manufacturing defects in 2020 to match a warranty
introduced by its main competitor. In 2020, Pronghorn accrued $590,000 of warranty expenses: actual expenditures for 2020 were
$281,000 with the remaining $309,000 anticipated in 2021.
In 2020, Pronghorn was subject to a 35% income tax rate. During the year, the federal government announced that tax rates would
be decreased to 33% 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:Account Titles and Explanation
(To record current tax expense.)
(To record future tax expense.)
Debit
Credit
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