Caitlyn's Carrot Cakes Inc. (CCCI) began operations in 2019. The following items caused taxable income to be different than pre-tax financial income for the years ended Dec. 31, 2019, and Dec. 31, 2020:
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Caitlyn's Carrot Cakes Inc. (CCCI) began operations in 2019. The following items caused taxable income to be different than pre-tax financial income for the years ended Dec. 31, 2019 and Dec. 31, 2020: Per books Per tax return 2019 2019 Pre-tax income 600,000 n/a Taxable income n/a ?? Depreciation expense 40,000 $ 78,000 Meals (50% tax deductible) 38,000 $ 19,000 Officers' life insurance expense $ 12,000 $ Municipal bond interest 2,000 $ Warranty expense 34,000 $ 12,000 Bad debt expense 35,000 $ 24,000 Fines & Violations 4,000 $ Gross profit - installment sales $ 100,000 $ 25,000 Revenue / Cash advances $ 18,000 $ 42,000 ?? Taxable income Depreciation expense Meals (50% tax deductible) Officers' life insurance expense Municipal bond interest Warranty expense Bad debt expense Fines & Violations Gross profit - installment sales Revenue / Cash advances Per books Per tax return 2020 2020 713,000 40,000 $ 65,000 52,000 $ 26,000 12,000 $ 3,000 $ 36,000 $ 40,000 38,000 $ 45,000 6,000 $ 110,000 $ 75,000 37,000 $ 45,000 $ $ CCCI's tax rate is 40% for all years and the company expects to report taxable income in all future years. Instructions: a Compute the following: 1.Pre-tax financial accounting (book) income adjusted for permanent differences at Dec. 31, 2019 & Dec. 31, 2020 2 Taxable inomce for the year ended Dec. 31, 2019 3 Pre-tax financial accounting (book) income for the year ended Dec. 31, 2020 Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2019 and 2020 Prepare the 2019 & 2020 income statement presentations beginning with pre-tax book income income before tax) Caitlyn's Carrot Cakes Inc. (CCCI) began operations in 2019. The following items caused taxable income to be different than pre-tax financial income for the years ended Dec. 31, 2019 and Dec. 31, 2020: Per books Per tax return 2019 2019 Pre-tax income 600,000 n/a Taxable income n/a ?? Depreciation expense 40,000 $ 78,000 Meals (50% tax deductible) 38,000 $ 19,000 Officers' life insurance expense $ 12,000 $ Municipal bond interest 2,000 $ Warranty expense 34,000 $ 12,000 Bad debt expense 35,000 $ 24,000 Fines & Violations 4,000 $ Gross profit - installment sales $ 100,000 $ 25,000 Revenue / Cash advances $ 18,000 $ 42,000 ?? Taxable income Depreciation expense Meals (50% tax deductible) Officers' life insurance expense Municipal bond interest Warranty expense Bad debt expense Fines & Violations Gross profit - installment sales Revenue / Cash advances Per books Per tax return 2020 2020 713,000 40,000 $ 65,000 52,000 $ 26,000 12,000 $ 3,000 $ 36,000 $ 40,000 38,000 $ 45,000 6,000 $ 110,000 $ 75,000 37,000 $ 45,000 $ $ CCCI's tax rate is 40% for all years and the company expects to report taxable income in all future years. Instructions: a Compute the following: 1.Pre-tax financial accounting (book) income adjusted for permanent differences at Dec. 31, 2019 & Dec. 31, 2020 2 Taxable inomce for the year ended Dec. 31, 2019 3 Pre-tax financial accounting (book) income for the year ended Dec. 31, 2020 Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2019 and 2020 Prepare the 2019 & 2020 income statement presentations beginning with pre-tax book income income before tax)
