The following information is available for Metlock Corporation for 2020. 1.   Depreciation reported on the tax return exceeded depreciation reported on the income statement by $122,000. This difference will reverse in equal amounts of $30,500 over the years 2021–2024. 2.   Interest received on municipal bonds was $11,000. 3.   Rent collected in advance on January 1, 2020, totaled $56,700 for a 3-year period. Of this amount, $37,800 was reported as unearned at December 31, 2020, for book purposes. 4.   The tax rates are 40% for 2020 and 35% for 2021 and subsequent years. 5.   Income taxes of $294,000 are due per the tax return for 2020. 6.   No deferred taxes existed at the beginning of 2020.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Problem 19-01

The following information is available for Metlock Corporation for 2020.

1.

 

Depreciation reported on the tax return exceeded depreciation reported on the income statement by $122,000. This difference will reverse in equal amounts of $30,500 over the years 2021–2024.

2.

 

Interest received on municipal bonds was $11,000.

3.

 

Rent collected in advance on January 1, 2020, totaled $56,700 for a 3-year period. Of this amount, $37,800 was reported as unearned at December 31, 2020, for book purposes.

4.

 

The tax rates are 40% for 2020 and 35% for 2021 and subsequent years.

5.

 

Income taxes of $294,000 are due per the tax return for 2020.

6.

 

No deferred taxes existed at the beginning of 2020.

 
 

 

 

 

 

Compute taxable income for 2020.

Taxable income for 2020

 

$enter Taxable income for 2020 in dollars

 
 

 

 

 

 

Compute pretax financial income for 2020.

Pretax financial income for 2020

 

$enter Pretax financial income for 2020 in dollars

 
 

 

 

 

 

Prepare the journal entries to record income tax expense, deferred income taxes, and income taxes payable for 2020 and 2021. Assume taxable income was $1,018,000 in 2021

Date

Account Titles and Explanation

Debit

Credit

2020

enter an account title

enter a debit amount

enter a credit amount

 

enter an account title

enter a debit amount

enter a credit amount

 

enter an account title

enter a debit amount

enter a credit amount

 

enter an account title

enter a debit amount

enter a credit amount

2021

enter an account title

enter a debit amount

enter a credit amount

 

enter an account title

enter a debit amount

enter a credit amount

 

enter an account title

enter a debit amount

enter a credit amount

 

enter an account title

enter a debit amount

enter a credit amount

 

 

 

 

Prepare the income tax expense section of the income statement for 2020, beginning with “Income before income taxes.”

 

 

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