Question
Buddy Co. reports $255,000 financial income for 2019, before adjusting the following differences for tax reporting purpose. 1. Municipal bond interest of $32,000 was received
Buddy Co. reports $255,000 financial income for 2019, before adjusting the following differences for tax reporting purpose.
1. Municipal bond interest of $32,000 was received and recorded.
2. Unrealized losses of $50,000on marketable securities recognized for financial reporting
3. Rent $24,000 of next two years paid
4. Litigation loss accrual of $31,000 is estimated to be paid in 2022.
The income tax rate is 20% for 2019 and future years.
Notes: Read carefully and follow strictly so that Bb can grade you correctly!
1. Use comma in numbers, one thousand is 1,000, not 1000. No $ sign. No positive or negative sign.
2. If no entry is required, write N/A.
3. Only use the following accounts: Income tax expense - C, Income tax expense - D, Income taxes payable, Deferred tax asset/liability - interest, Deferred tax asset/liability - loss, Deferred tax asset/liability - litigation, Deferred tax asset/liability - rent.
4. Copy account names accurately to receive credits, names are not case sensitive.
1. Compute the Company's taxable income and income tax payable for 2019.
Pretax financial income
Add/Less: Permanent differences (net)
Pretax financial income adjusted
Add/Less: Temporal differences
Unrealized losses
Litigation loss accrual
Rent of next two years paid
Taxable income
Income tax payable
2. Prepare the income tax journal entries of the Company for 2019.
Journal Entries - current
Account Dr.
Account Cr.
Journal Entries - deferred
Account Dr.
Account Dr.
Account Cr.
Account Cr.
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