Sheridan Company reported the following results for the year ended December 31, 2020, its first year of operations: Income (per books before income taxes) $3343000 Taxable income 4466000 The disparity between book income and taxable income is attributable to a temporary difference, which will reverse in 2021. What should Sheridan record as a net deferred tax asset or liability for the year ended December 31, 2020, assuming that the enacted tax rates in effect are 35% in 2020 and 30% in 2021? O $393050 deferred tax liability O $336900 deferred tax liability O $393050 deferred tax asset O $336900 deferred tax asset

Sheridan Company reported the following results for the year ended December 31, 2020, its first year of operations: Income (per books before income taxes) $3343000 Taxable income 4466000 The disparity between book income and taxable income is attributable to a temporary difference, which will reverse in 2021. What should Sheridan record as a net deferred tax asset or liability for the year ended December 31, 2020, assuming that the enacted tax rates in effect are 35% in 2020 and 30% in 2021? O $393050 deferred tax liability O $336900 deferred tax liability O $393050 deferred tax asset O $336900 deferred tax asset

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: A company's income statement reported net income of $88,500 during 2019. The income tax return…

A: INTRODUCTION: A tax rate is the percentage of a person's or corporation's income that is taxed. The…

Q: Cullumber Construction Company changed from the completed-contract to the percentage-of-completion…

A: The objective of the question is to calculate the net income for the year 2021 and to determine the…

Q: Following the net operating loss offset tax rules, the company appropriately applies the net…

A: This question presents a scenario where a company has a net operating loss in one year and a taxable…

Q: Sheridan Corporation began operations in 2020 and reported pretax financial income of $212,000 for…

A: Taxable income = Pretax financial income - Excess of depreciation as per tax over booksIncome tax…

Q: Discord Inc. income tax return shows taxes currently payable for 2020 of $85,000. The company…

A: Deferred tax asset is a non-current asset which shows an advance payment of tax and has a debit…

Q: For the year ended December 31, 2019, Nelson Co.’s income statement showed income of $435,000 before…

A: The income which is taxed as per the rules and principles of tax laws is called taxable income.

Q: CSX Corporation reported the following in its tax footnote to its 2019 financial statements. Use…

A: ROA stands for return on assets. ROA is a ratio that computes the return on total assets. Formula =…

Q: The following information relates to Crane Corp.: At July 1, 2022 At June 30, 2023 Temporary…

A: Taxable income = Pretax accounting income + Deductible temporary differences + Taxable Temporary…

Q: Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes…

A: Deferred tax asset are expected future tax benefits arising due to temporary differences which will…

Q: GYV Ltd has the following deffered tax balances as at 30 June 2019 DTA $900000 DTL.…

A: Calculation of Deferred Tax Asset: DTA = ( 900000 / 20 % ) = 4500000 = 4500000 x 5…

Q: Shamrock Inc. (Sham) reported a taxable loss AND an accounting loss of $130,000 in 2022. Sham has…

A: The objective of the question is to calculate the net loss for accounting purposes that will be…

Q: Bonita Company reports pretax financial income of $76,500 for 2020. The following items cause…

A: Taxable income: It is the income calculated as per the tax laws and on which the applicable tax…

Q: Skysong Corporation began operations in 2020 and reported pretax financial income of $244,000 for…

A: Deferred tax liability is the liability for tax which is not yet due. This will due in future tax…

Q: For the current year, LNS corporation reported the following taxable income at the end of its first,…

A: Tax rules can have a significant effect on a person's income. This is because taxes are typically…

Q: .) Krondor Co. reported book income of $10,359,000 for the year ended first year of operations.…

A: Income tax actual paid and income tax expenses some time differ because of deferred income…

Q: At the end of 2019, Sentry Company reported a deferred tax liability of $12,350 based on an income…

A: Given Information: Deferred tax liability = $12,350 Income tax rate = 26% Changed income tax rate =…

Q: For the year ended December 31, 2023, Crane Ltd. reported income before income taxes of $180,000.…

A: Net deferred tax liability for Crane Ltd. for the year ended December 31, 2023, is…

Q: r the year ended December 31, 2019, Nelson Co.’s income statement showed income of $425,000 before…

A: Taxable income is the portion of a person's or a company's income that is used to calculate how much…

Q: At the end of the current year, Newsmax Incorporated has $400,000 of subscriptions received in…

A: The objective of the question is to determine the type of deferred tax that would be expected to be…

Q: Compute taxable income for 2019. Taxable income $enter Taxable income in dollars (b)…

A: Deferred tax asset is the tax asset which the company has paid in advance to the government during…

Q: Piper, Inc. reported a net deferred tax asset balance of $166,650 resulting from an estimated…

A: The objective of the question is to determine the journal entry Piper, Inc. needs to make to adjust…

Q: At December 31, 2020, Novak Company had a net deferred tax liability of $445,000. An explanation of…

A: Temporary Differences (Asset) Liability Classification Depreciation 188000 Non Current…

Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

Sheridan Company reported the following results for the year ended December 31, 2020, its first year of operations:
Income (per books before income taxes) $3343000
Taxable income
4466000
The disparity between book income and taxable income is attributable to a temporary difference, which will reverse in 2021. What
should Sheridan record as a net deferred tax asset or liability for the year ended December 31, 2020, assuming that the enacted tax
rates in effect are 35% in 2020 and 30% in 2021?
O $393050 deferred tax liability
$336900 deferred tax liability
$393050 deferred tax asset
$336900 deferred tax asset

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Deferred tax asset

VIEW

Step 2: Calculation of deferred tax asset

VIEW

Solution

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

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

At the end of 2019, Sentry Company reported a deferred tax liability of $9,724 based on an income tax rate of 26%. On January 2, 2020, Congress changed the income tax rate to 35%. Required: 1. Calculate the amount of the adjustment to Sentry’s 2019 year-end deferred tax liability. 2. Prepare the journal entry to correct Sentry’s deferred tax liability.
The following information is taken from Igado Company’s 2020 financial records: Pretax accounting income- P1,500,000 Accrued warranty in excess of actual warranty expenditures- P24,500 Excess tax depreciation- P45,000 Taxable income- P1,479,500 The temporary differences were created entirely in 2020. The future deductible amount is expected to reverse in 2021 and the future taxable amount will reverse in equal amounts in the next three years. Tax rates are: 30% in 2020; 32% in 2021; 34% in 2022 and 35% in 2023. How much should Igado Company report as deferred tax asset and deferred tax liability, respectively, at December 31, 2020? A. P7,840 and P14,400 B. P7,350 and P15,150 C. P7,350 and P14,400 D. P7,840 and P15,150
The information that follows pertains to Esther Food Products: a. At December 31, 2024, temporary differences were associated with the following future taxable (deductible) amounts: Depreciation Prepaid expenses Warranty expenses b. No temporary differences existed at the beginning of 2024. c. Pretax accounting income was $46,000 and taxable income was $9,000 for the year ended December 31, 2024. d. The tax rate is 25%. Required: Complete the following table given below and prepare the appropriate journal entry to record income taxes for 2024. Complete this question by entering your answers in the tabs below. Calculation General Journal $ 32,000 11,000 (6,000) Complete the following table given below to record income taxes for 2024. Note: Amounts to be deducted should be entered with a minus sign. Description Pretax accounting income Permanent differences Income subject to taxation Temporary Differences Income taxable in current year $ Amount 46,000 X Tax Rate = x X Recorded as:
Sheridan Corporation reported $230000 in revenues in its 2021 financial statements, of which $91100 will not be included in the tax return until 2022. The enacted tax rate is 40% for 2021 and 35% for 2022. What amount should Sheridan report for deferred income tax liability in its balance sheet at December 31, 2021? O $55560 O $48615 O $36440 O $31885
At the beginning of 2021, Pitman Co. had pretax financial income of $1,200,000. Additionally, there was a timing difference of $300,000 due to an accounts receivable that will not be collected until the following year. The tax rate us 30%. A. Calculate the total taxable income for 2021. B. Calculate Income tax expense, income tax payable, and the deferred amount for 2021, and create the journal entry.
Shwonson Industries reported a deferred tax asset of $5.50 million for the year ended December 31, 2020, related to a temporary difference of $22 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 $32 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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the appropriate journal entry to record Shwonson's income tax expense in 2021. (If no entry is required for a transaction/event, select "No journal entry…
Bonita Inc. reports the following pretax income (loss) for both book and tax purposes. Pretax Year Income (Loss) Tax Rate 2018 $124,000 20 % 2019 86,000 20 % 2020 (89,000 ) 25 % 2021 126,000 25 % The tax rates listed were all enacted by the beginning of 2018. Prepare the journal entries for years 2018-2021 to record income tax expense (benefit) and income taxes payable, and the tax effects of the loss carryforward, assuming that based on the weight of available evidence, it is more likely than not that one-half of the benefits of the loss carryforward will not be realized. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Teal Company reports pretax financial income of $72,600 for 2020. The following items cause taxable income to be different than pretax financial income. 1. Depreciation on the tax return is greater than depreciation on the income statement by $17,200. 2. Rent collected on the tax return is greater than rent recognized on the income statement by $20,300. 3. Fines for pollution appear as an expense of $9,900 on the income statement. Teal’s tax rate is 30% for all years, and the company expects to report taxable income in all future years. There are no deferred taxes at the beginning of 2020. (a) Compute taxable income and income taxes payable for 2020. Taxable income $enter a dollar amount Income taxes payable $enter a dollar amount
Beaver Dam Inc. (BDI) listed the following items to prepare a reconciliation between book and taxable income. GAAP net income before tax $700,000 Meal and entertainment expense 100,000 GAAP depreciation expense 110,000 Depreciation expense for tax purposes 120,000 c. Compute the net increase in BDI’s deferred tax assets or deferred tax liabilities for the year. d. Prepare the journal entry to record taxes for the year.
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?
At the end of the year, a deductible temporary difference of $40 million has been recognised due to the difference between the carrying amount of a liability account for estimated expenses and its tax base. Taxable income is $50 million. No temporary differences existed at the beginning of the year, and the tax rate is 35%. Required: a. Prepare the journal entry(s) to record income taxes during the period. b.How much will income tax expense be shown in the income statement? c.
In 2020, Sunland Corporation had pretax financial income of $185,000 and taxable income of $117,000. The difference is due to the use of different depreciation methods for tax and accounting purposes. The effective tax rate is 20%.Compute the amount to be reported as income taxes payable at December 31, 2020. Income taxes payable at December 31, 2020 $enter the amount to be reported as income taxes payable at December 31, 2017