Ross Company has been in business for several years, during which time it has been profitable. For each of those years, Ross reported (and paid taxes on) taxable income in the same amount as pretax financial income based on the following revenues and expenses:Revenues 2017 $253,0002018 $241,000Expenses2017 $180,0002018 $196,000 Ross was subject to the following income tax rates during this period: 2017, 30%; and 2018, 25%. During 2019, Ross experienced a severe decrease in the demand for its products. The company tried to offset this decrease with an expensive marketing campaign, but was unsuccessful. Consequently, at the end of 2019, Ross determined that its revenues were $60,000 and its expenses were $193,000 for both income taxes and financial reporting.At the end of 2019 due to increasing competition, Ross deemed that it was more likely than not that 50% of the future deductible amount will not be realized. The income tax rate was 21% for the entire period, and no change in the tax rate had been enacted for future years.In 2020, Ross developed and introduced a new product that proved to be in high demand. For 2020, Ross reported revenues of $181,000 and expenses of $155,000 for both income taxes and financial reporting. The applicable income tax rate was 21%.Required:1. Prepare Ross’s income tax journal entries at the end of 2019.2. Prepare Ross’s 2019 income statement.3. Prepare the income tax journal entry at the end of 2020.4. Prepare Ross’s 2020 income statement.
Ross Company has been in business for several years, during which time it has been profitable. For each of those years, Ross reported (and paid taxes on) taxable income in the same amount as pretax financial income based on the following revenues and expenses:
Revenues
2017 $253,000
2018 $241,000
Expenses
2017 $180,000
2018 $196,000
Ross was subject to the following income tax rates during this period: 2017, 30%; and 2018, 25%. During 2019, Ross experienced a severe decrease in the demand for its products. The company tried to offset this decrease with an expensive marketing campaign, but was unsuccessful. Consequently, at the end of 2019, Ross determined that its revenues were $60,000 and its expenses were $193,000 for both income taxes and financial reporting.
At the end of 2019 due to increasing competition, Ross deemed that it was more likely than not that 50% of the future deductible amount will not be realized. The income tax rate was 21% for the entire period, and no change in the tax rate had been enacted for future years.
In 2020, Ross developed and introduced a new product that proved to be in high demand. For 2020, Ross reported revenues of $181,000 and expenses of $155,000 for both income taxes and financial reporting. The applicable income tax rate was 21%.
Required:
1. Prepare Ross’s income tax journal entries at the end of 2019.
2. Prepare Ross’s 2019 income statement.
3. Prepare the income tax
4. Prepare Ross’s 2020 income statement.
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