Shwonson Industries reported a deferred tax asset of $5.50 million for the year ended December 31, 2020, related to a temporarydifference of $22 million. The tax rate was 25%. The temporary difference is expected to reverse in 2022, at which time the deferredtax asset will reduce taxable income. There are no other temporary differences in 2020-2022. Assume a new tax law is enacted in2021 that causes the tax rate to change from 25% to 15% beginning in 2022. (The rate remains 25% for 2021 taxes.) Taxable income in2021 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 2Prepare 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 required" in the first account field. Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000should be entered as 5.50).)View transaction list1 Record 2021 income taxes.Note :journal entry has been enteredRecord entryClear entryXCreditView general journal Shwonson Industries reported a deferred tax asset of $5.50 million for the year ended December 31, 2020, related to a temporarydifference of $22 million. The tax rate was 25%. The temporary difference is expected to reverse in 2022, at which time the deferredtax asset will reduce taxable income. There are no other temporary differences in 2020-2022. Assume a new tax law is enacted in2021 that causes the tax rate to change from 25% to 15% beginning in 2022. (The rate remains 25% for 2021 taxes.) Taxable income in2021 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 2What effect, will enacting the change in the 2022 tax rate, have on Shwonson's 2021 net income? (Enter your answer inmillion rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)Shwonson's 2021 net income willmillion< Required 1Required 2 >

Solution : Income tax payable = Taxable income * tax rate Decrease in deferred tax assets = Existing…

Answered: Shwonson Industries reported a deferred…

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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Crane Corporation has one temporary difference at the end of 2020 that will reverse and cause taxable amounts of $56,200 in 2021, $61,000 in 2022, and $66,500 in 2023. Crane’s pretax financial income for 2020 is $285,200, and the tax rate is 30% for all years. There are no deferred taxes at the beginning of 2020. Prepare the income tax expense section of the income statement for 2020, beginning with the line “Income before income taxes.”. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Crane CorporationIncome Statement (Partial)choose the accounting period Income before income taxes $285,200 select an opening section name select an income statement item $enter a dollar amount…
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?
Sherrod, Inc., reported pretax accounting income of $70 million for 2021. The following information relates to differences between pretax accounting income and taxable income: Income from installment sales of properties included in pretax accounting income in 2021 exceeded that reported for tax purposes by $4 million. The installment receivable account at year-end 2021 had a balance of $6 million (representing portions of 2020 and 2021 installment sales), expected to be collected equally in 2022 and 2023. Sherrod was assessed a penalty of $1 million by the Environmental Protection Agency for violation of a federal law in 2021. The fine is to be paid in equal amounts in 2021 and 2022. Sherrod rents its operating facilities but owns one asset acquired in 2020 at a cost of $60 million. Depreciation is reported by the straight-line method, assuming a four-year useful life. On the tax return, deductions for depreciation will be more than straight-line depreciation the first two years but…
Concord Construction Company changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2021. For tax purposes, the company employs the completed-contract method and will continue this approach in the future. (Hint: Adjust all tax consequences through the Deferred Tax Liability account.) The appropriate information related to this change is as follows. Pretax Income from: Percentage-of-Completion Completed-Contract Difference 2020 $747,000 $539,000 $208,000 2021 673,000 468,000 205,000 (a) Assuming that the tax rate is 30%, what is the amount of net income that would be reported in 2021?
At the end of 2020, Payne Industries had a deferred tax asset account with a balance of $125 million attributable to a temporary book-tax difference of $500 million in a liability for estimated expenses. At the end of 2021, the temporary difference is $384 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2021 is $900 million and the tax rate is 25%. Required:1. Prepare the journal entry(s) to record Payne’s income taxes for 2021, assuming it is more likely than not that the deferred tax asset will be realized.2. Prepare the journal entry(s) to record Payne’s income taxes for 2021, assuming it is more likely than not that only one-fourth of the deferred tax asset ultimately will be realized.
Sunland Corporation has one temporary difference at the end of 2025 that will reverse and cause taxable amounts of $56,200 in 2026, $61,000 in 2027, and $66,500 in 2028. Sunland's pretax financial income for 2025 is $285,200, and the tax rate is 30% for all years. There are no deferred taxes at the beginning of 2025. Your answer is correct. Compute taxable income and income taxes payable for 2025. Taxable income Income taxes payable $ eTextbook and Media List of Accounts Your answer is partially correct. $ Account Titles and Explanation Income Tax Expense Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2025. (List all debit entries before credit entries. 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 O for the amounts.) Deferred Tax Liability Income Tax Payable 101500 30450 Debit I Credit 30450
At the end of 2020, Payne Industries had a deferred tax asset account with a balance of $100 million attributable to a temporary book- tax difference of $400 million in a liability for estimated expenses. At the end of 2021, the temporary difference is $304 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2021 is $720 million and the tax rate is 25%. Required: 1. Prepare the journal entry(s) to record Payne's income taxes for 2021, assuming it is more likely than not that the deferred tax asset will be realized in full. 2. Prepare the journal entry(s) to record Payne's income taxes for 2021, assuming it is more likely than not that only one-fourth of the deferred tax asset ultimately will be realized. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the journal entry(s) to record Payne's income taxes for 2021, assuming it is more likely than not that the deferred…
Shwonson Industries reported a deferred tax asset of $5 million for the year ended December 31, 2020, related to a temporary difference of $20 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 $30 million.Required:Determine the effect of the tax rate change and prepare the appropriate journal entry to record Shwonson’s income tax expense in 2021. What effect, if any, will enacting the change in the 2022 tax rate have on Shwonson’s 2021 net income?
Carla Vista Corporation began 2025 with a $54,280 balance in the Deferred Tax Liability account. At the end of 2025, the related cumulative temporary difference amounts to $413,000, and it will reverse evenly over the next two years. Pretax accounting income for 2025 is $619,500 , the tax rate for all years is 20%, and taxable income for 2025 is $477,900. Compute income taxes payable for 2025
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
At the end of 2020, Payne Industries had a deferred tax asset account with a balance of $90 million attributable to a temporary book-tax difference of $360 million in a liability for estimated expenses. At the end of 2021, the temporary difference is $272 million. Payne has no other temporary differences. Taxable income for 2021 is $648 million and the tax rate is 25%. Payne has a valuation allowance of $36 million for the deferred tax asset at the beginning of 2021. Required: Prepare the journal entry(s) to record Payne’s income taxes for 2021, assuming it is more likely than not that the deferred tax asset will be realized in full. Prepare the journal entry(s) to record Payne’s income taxes for 2021, assuming it is more likely than not that only one-fourth of the deferred tax asset ultimately will be realized.
Nash Corporation has one temporary difference at the end of 2020 that will reverse and cause taxable amounts of $53,100 in 2021, $57,800 in 2022, and $63,100 in 2023. Nash’s pretax financial income for 2020 is $312,000, and the tax rate is 30% for all 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 (b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020. (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.) Account Titles and Explanation Debit Credit enter an account title enter a debit amount enter a credit amount enter an account…

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