Vaughn Company has the following two temporary differences between its income tax expense and income taxes payable. Pretax financial income Excess depreciation expense on tax return Excess warranty expense in financial income Taxable income The income tax rate for all years is 20%. 2020 $877,000 (29,500 ) 19,800 $867,300 2021 $932,000 (39,400) 10,400 $903,000 2022 $912,000 (9,800 ) 7,600 $909,800

Vaughn Company has the following two temporary differences between its income tax expense and income taxes payable. Pretax financial income Excess depreciation expense on tax return Excess warranty expense in financial income Taxable income The income tax rate for all years is 20%. 2020 $877,000 (29,500 ) 19,800 $867,300 2021 $932,000 (39,400) 10,400 $903,000 2022 $912,000 (9,800 ) 7,600 $909,800

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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Chocolate Pie Company's taxable income and other data for 2020 are presented below: Taxable Income $ 500,000 Interest received on municipal bonds 55,000 Estimated bad debt expense (not written off) 30,000 Cash expenditures for warranties 98,000 Product warranty expense for accounting purposes 152,000 Gross profit on installment sales for 2020 170,000 Gross profit recognized for tax purposes based on 2020 installment sales 150,000 Required: a. Calculate 2020 pretax financial income. b. For each item, explain why there is a difference if any exists, between how it is treated for tax purposes and pretax financial income.
Buffalo Company has the following two temporary differences between its income tax expense and income taxes payable. 2020 2021 2022 Pretax financial income $811,000 $932,000 $992,000 Excess depreciation expense on tax return (31,500 ) (39,100 ) (9,900 ) Excess warranty expense in financial income 19,900 9,800 8,300 Taxable income $799,400 $902,700 $990,400 The income tax rate for all years is 20%. (a) Your Answer Correct Answer (Used) Assuming there were no temporary differences prior to 2020, prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020, 2021, and 2022. (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…
Q1. Taxable income and applicable tax rates for C.J. Company’s first four years are shown below. For each year, taxable income and pretax financial income are identical. In the table below, taxable income is before any consideration of NOL carryback and carryforward. The enacted tax rates were known at 1/1/2018. Taxable Income Enacted tax rate 2018 $200 20% 2019 ($300) 15% 2020 $340 25% 2021 $210 25% Now assume that C.J. opted to carryback its 2019 NOL and carryforward any unused NOL to future years. Complete the table below for 2018 through 2021 to show the amount of income tax payable to the IRS or the refund due from the IRS for each year. Put your answer in the table below. Show tax payable as a positive number and tax refund as a negative number. Year Tax…
J-Matt, Inc., had pretax accounting income of $331,000 and taxable income of $376,000 in 2021. The only difference between accounting and taxable income is estimated product warranty costs of $45,000 for sales in 2021. Warranty payments are expected to be in equal amounts over the next three years (2022–2024) and will be tax deductible at that time. Recent tax legislation will change the tax rate from the current 25% to 20% in 2023. Determine the amounts necessary to record J-Matt’s income taxes for 2021 and prepare the appropriate journal entry.
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