The records of Anderson Inc. provide the following information for the tax year 2020. - There was

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The records of Anderson Inc. provide the following information for the tax year 2020.

- There was no beginning balance in deferred tax account(s).

- Taxable income for 2020 was \(\$ 60,000\).

- Tax rate is \(25 \%\).

- Three temporary differences were identified:

1. Estimated litigation accrual of \(\$ 20,000\), not deductible for tax purposes. Settlement not expected to take place until 2022.

2. Excess of accelerated depreciation over GAAP depreciation of \(\$ 12,000\) caused a difference in the \(\$ 50,000\) GAAP basis and the \(\$ 38,000\) tax basis of equipment. One-third of the difference will reverse in 2021.

3. Unrealized holding gain on equity securities of \(\$ 3,500\) not recognized for tax purposes. Anderson Inc. intends to sell the security in early 2021. The investment (accounted for under FV-NI) is reported at its fair value of \(\$ 10,000\) at year-end in its financial statements.

Required

a. Record the income tax journal entry on December 31, 2020.

b. Record the income tax journal entry on December 31,2021 , assuming taxable income of \(\$ 125,000\).

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Intermediate Accounting Volume 2

ISBN: 9781618533135

2nd Edition

Authors: Hanlon, Hodder, Nelson, Roulstone, Dragoo

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