Acme Leasing Company had the following pre-tax accounting incomes for 2019 and 2020:

2019$520,000

2020$600,000

In addition, the company had the following items that created differences between pre-tax accounting income and taxable income:

1. On October 1, 2019, Acme rented a special purpose machine to Taylor Inc. for the six-month period October 1, 2019, to March 31, 2020. Once the six-month rental period was over, the machine was returned to Acme. On October 1, 2019, Taylor paid Acme the full six-month rental fee of $8,000. Acme appropriately recorded half this amount (i.e., $4,000) as rent revenue on its books each year in 2019 and 2020.

2. In 2019, Acme was a defendant in a lawsuit filed by a former employee and appropriately accrued a loss contingency (i.e., an expense) on its books in that year of $120,000 based on a verdict against the company by a federal judge.The judge ordered Acme to pay the $120,000 to the plaintiff (i.e., the former employee of Acme) in three equal installments of $40,000 in each of the years 2019, 2020, and 2021 (i.e., $40,000 paid each year).Such payments are deductible for tax purposes in the period paid.

3. Acme has an investment in municipal bonds, and it received $15,000 in interest each of the years 2019 and 2020 and appropriately included the interest revenue in its accounting income in both years.In addition, Acme incurred brokerage fees of $1,000 on this investment in each of the years 2019 and 2020 and appropriately deducted the brokerage fees as an expense in determining its accounting income each year.

4. On January 1, 2019, Acme purchased an automobile for $30,000 to be used in the business. The automobile is being depreciated per books using the straight-line method over a five-year life with no salvage value. For tax purposes, Acme chose to expense the entire $30,000 cost of the automobile in the year of purchase (i.e., 2019) under the Section 179 election.

The tax rate in effect in 2019 was 30%.In 2020, Congress enacted a tax rate of 25% that became effective for 2020 and years later.

REQUIRED:Assuming no deferred tax accounts existed prior to 2019, in the space provided below, record all income tax related journal entries for Acme Leasing Company for 2019 and 2020 necessitated by the information above (Hint: before recording the entries, prepare the appropriate schedules needed to make these entries).

20192020