At the end of 2019, its first year of operations, Swelland Company reported a pretax operating loss
Question:
At the end of 2019, its first year of operations, Swelland Company reported a pretax operating loss of $32,000 for both financial reporting and income tax purposes. At that time, Swelland had no positive verifiable evidence that it would earn future taxable income. However, due to successful management, the company reported pretax operating income (and taxable income) of $70,000 in 2020. During both years, the income tax rate was 30%, and no change had been enacted for future years.
Required:
1. Prepare Swelland’s income tax journal entries at the end of 2019.
2. Prepare Swelland’s income tax journal entry at the end of 2020.
3. Prepare the lower portion of Swelland’s 2020 income statement.
Step by Step Answer:
Intermediate Accounting Reporting and Analysis
ISBN: 978-1337788281
3rd edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach