22) Duran Co, at the end of 20x1, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income $300,000 Prepaid expenses deducted in the tax return, but not included in the income statement: 8,000 Extra depreciation (tax depreciation minus accounting depreciation) 75,000 Non-taxable interest revenue from municipal bonds 20,000 The use of the depreciable assets will result in taxable amounts of $25,000 in each of the next three years. 1) Compute the taxable income for 20xl (show your computation. No credit if not) 2) Prepare the journal entry to record income tax expense, deferred income tax and income tax payable for 20x1, assuming an income tax rate of 40% for all years. 3) Compute net income for 20x1. 23) Actuary and trustee reports indicate the following changes in the PBO and plan assets of Random Love Inc. during 2021: $64 million Prior service cost at Jan. 1, 2021, from plan amendment at the beginning of 2019 (amortization: $8 million per year) Net loss-pensions at Jan.1, 2021 (previous losses exceeded previous gains) Average remaining service life of the active employee group Actuary's discount rate $80 million 10 years 8% ($ in millions) Beginning of 2021 PBO $600 $400 PLAN ASSETS Beginning of 2021 Return on plan assets, 7.5% (10% expected) 30 96 48 (4) Cash contributions 90 Service cost Interest cost, 8% Loss (gain) on PBO Less: Retiree benefits End of 2021 (40) $700 Less: Retiree benefits End of 2021 (40 $480 Required: (Do only what is required). 1. Determine Random's pension expense for 2021. Show your computation (if not, no credit). 2. Prepare the appropriate journal entries to record the expense as well as the cash contribution to plan assets. 22) Duran Co, at the end of 20x1, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income $300,000 Prepaid expenses deducted in the tax return, but not included in the income statement: 8,000 Extra depreciation (tax depreciation minus accounting depreciation) 75,000 Non-taxable interest revenue from municipal bonds 20,000 The use of the depreciable assets will result in taxable amounts of $25,000 in each of the next three years. 1) Compute the taxable income for 20xl (show your computation. No credit if not) 2) Prepare the journal entry to record income tax expense, deferred income tax and income tax payable for 20x1, assuming an income tax rate of 40% for all years. 3) Compute net income for 20x1. 23) Actuary and trustee reports indicate the following changes in the PBO and plan assets of Random Love Inc. during 2021: $64 million Prior service cost at Jan. 1, 2021, from plan amendment at the beginning of 2019 (amortization: $8 million per year) Net loss-pensions at Jan.1, 2021 (previous losses exceeded previous gains) Average remaining service life of the active employee group Actuary's discount rate $80 million 10 years 8% ($ in millions) Beginning of 2021 PBO $600 $400 PLAN ASSETS Beginning of 2021 Return on plan assets, 7.5% (10% expected) 30 96 48 (4) Cash contributions 90 Service cost Interest cost, 8% Loss (gain) on PBO Less: Retiree benefits End of 2021 (40) $700 Less: Retiree benefits End of 2021 (40 $480 Required: (Do only what is required). 1. Determine Random's pension expense for 2021. Show your computation (if not, no credit). 2. Prepare the appropriate journal entries to record the expense as well as the cash contribution to plan assets
