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(b) Prepare the journal entry to record income tax expense for 2021. You must provide work to support your answer. Required: on next page, provide

(b) Prepare the journal entry to record income tax expense for 2021. You must provide work to support your answer.

  1. Required: on next page, provide your work to the following requirements.

    (a) Determine the income taxes payable for year 2021 by preparing a schedule starting with pre- tax financial income followed with adjustments for the differences between pre-tax financial income and taxable income. You must indicate whether a difference is temporary or permanent.image text in transcribed

Temporary and Permanent Differences (41 points) 2. Sunshine Company began operations on January 1, 2020. The following information is provided for use in computing the necessary journal entry and financial statement information related to income taxes for year 2021: In 2021, the company completed a contract that allow the customer to pay on an installment basis. It recognized $5,600 for financial reporting purpose, but only $1,100 on the tax return. The company expects future collections on the related installment receivables in the next three years. In 2021, the company received interest revenue on municipal bonds of $200. The company purchased $60,000 equipment on 1/1/2020. The depreciation charges to be taken with regard to the equipment are as follows: 2020 2021 2022 2023 2024 2025 Per book 10.000 10.000 10.000 10.000 10.000 10.000 Per tax 12,000 19,200 11,5206,912 6,912 3,456 Book - Tax (2,000) (9,200) (1,520) 3,088 3,088 6,544 The warranty liability had a beginning balance of $2,800. In 2021, the company accrued warranty expense of $4,000 in its income statement. It incurred and paid $1.900 to satisfy warranty claims, of which $1,300 was paid on products sold in 2020, and 600 was paid on products sold in 2021. The warranty liability account had ending balance of $4,900. In 2021, the company paid $10,000 insurance premium for the CEO's life insurance. The life insurance expense recognized in 2021 was $9,000. In 2021, the company paid a fine of $2,000 due to environmental law violation. Pretax accounting income is $45,000 for 2021. Tax rate is 25% for all years. Sunshine Company correctly recorded deferred tax assets of $700 and deferred tax liabilities of $500 as of December 31, 2020. Temporary and Permanent Differences (41 points) 2. Sunshine Company began operations on January 1, 2020. The following information is provided for use in computing the necessary journal entry and financial statement information related to income taxes for year 2021: In 2021, the company completed a contract that allow the customer to pay on an installment basis. It recognized $5,600 for financial reporting purpose, but only $1,100 on the tax return. The company expects future collections on the related installment receivables in the next three years. In 2021, the company received interest revenue on municipal bonds of $200. The company purchased $60,000 equipment on 1/1/2020. The depreciation charges to be taken with regard to the equipment are as follows: 2020 2021 2022 2023 2024 2025 Per book 10.000 10.000 10.000 10.000 10.000 10.000 Per tax 12,000 19,200 11,5206,912 6,912 3,456 Book - Tax (2,000) (9,200) (1,520) 3,088 3,088 6,544 The warranty liability had a beginning balance of $2,800. In 2021, the company accrued warranty expense of $4,000 in its income statement. It incurred and paid $1.900 to satisfy warranty claims, of which $1,300 was paid on products sold in 2020, and 600 was paid on products sold in 2021. The warranty liability account had ending balance of $4,900. In 2021, the company paid $10,000 insurance premium for the CEO's life insurance. The life insurance expense recognized in 2021 was $9,000. In 2021, the company paid a fine of $2,000 due to environmental law violation. Pretax accounting income is $45,000 for 2021. Tax rate is 25% for all years. Sunshine Company correctly recorded deferred tax assets of $700 and deferred tax liabilities of $500 as of December 31, 2020

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