The following information has been obtained for Swifty Corporation. 1. 2. 3. 4. 5. 6. 7. Prior to 2020, taxable income and pretax financial income were identical. Pretax financial income is $1,764,000 in 2020 and $1,372,000 in 2021. On January 1, 2020, equipment costing $1,160,000 is purchased. It is to be depreciated on a straight-line basis over 5 years for tax purposes and over 8 years for financial reporting purposes. (Hint: Use the half-year convention for tax purposes, as discussed in Appendix 11A.) Interest of $60,000 was earned on tax-exempt municipal obligations in 2021. Included in 2021 pretax financial income is a gain on discontinued operations of $181,000, which is fully taxable. The tax rate is 20% for all periods. Taxable income is expected in all future years.

The following information has been obtained for Swifty Corporation. 1. 2. 3. 4. 5. 6. 7. Prior to 2020, taxable income and pretax financial income were identical. Pretax financial income is $1,764,000 in 2020 and $1,372,000 in 2021. On January 1, 2020, equipment costing $1,160,000 is purchased. It is to be depreciated on a straight-line basis over 5 years for tax purposes and over 8 years for financial reporting purposes. (Hint: Use the half-year convention for tax purposes, as discussed in Appendix 11A.) Interest of $60,000 was earned on tax-exempt municipal obligations in 2021. Included in 2021 pretax financial income is a gain on discontinued operations of $181,000, which is fully taxable. The tax rate is 20% for all periods. Taxable income is expected in all future years.

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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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

taxable income : 1225000

income taxes payable: 245000

The following information has been obtained for Swifty Corporation.
1.
2.
3.
4.
5.
6.
7.
Prior to 2020, taxable income and pretax financial income were identical.
Pretax financial income is $1,764,000 in 2020 and $1,372,000 in 2021.
On January 1, 2020, equipment costing $1,160,000 is purchased. It is to be depreciated on a straight-line basis over 5 years
for tax purposes and over 8 years for financial reporting purposes. (Hint: Use the half-year convention for tax purposes, as
discussed in Appendix 11A.)
Interest of $60,000 was earned on tax-exempt municipal obligations in 2021.
Included in 2021 pretax financial income is a gain on discontinued operations of $181,000, which is fully taxable.
The tax rate is 20% for all periods.
Taxable income is expected in all future years.

(b)
Prepare the journal entry to record 2021 income tax expense, income taxes payable, and deferred taxes. (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.)
Account Titles and Explanation
Debit
100
Credit

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