Contribution Expenditure

ABC, Inc. was organized on January 1, 2020. The company closes books annually and prepares financial statements on December 31 of each year. In addition, it uses an accumulation accounting system.

The book income (before contributions) for 2020 and 2021 is $ 400,000 and $ 950,000, respectively. The company's tax rate is 30% for all years. The temporary and permanent differences between taxable income and book income for 2020 and 2021 are summarized below:

1. In the 2020 statement of income and expenses, the company reported a government fine of $ 100,000.

2. In the statement of income and expenses of 2021, the company reported the collection of a life policy from one of its senior executives. The company, as an insurance beneficiary, received $ 250,000 in 2021 after the executive's death.

3. In 2021 the company estimated a contingent debt of $ 30,000 for a lawsuit that is likely to lose.

4. $ 50,000 respectively for interest income. These interests are exempt from taxes.

5. Total sales income for 2020 included $ 60,000 of installment sales to be collected equally in 2021 and 2022. The Statement of Income and Expenses for 2021 does not include any installment sales.

6. Below is a table summarizing the depreciation expense of the company reported in the books (straight line) and that of the return (accelerated) Year Straight Line Accelerated 2020 $ 50,000 $ 75,000 2021 50,000 65,000

7. December 25, 2021 The company prepaid $ 33,000 for a warehouse rental for the period from January 1, 2022 to June 30, 2022.

8. During 2020, the company charged $ 10,000 in advance to its customers. All products were delivered to customers in the first weeks of January 2021

INSTRUCTIONS: Answer the following questions. Show your computations whenever possible. You can solve the problem in Excel and upload the file. REQUIRED 1: Prepare the 2021 reconciliation. Identify in the reconciliation those temporary differences that originate (O) and those that are canceled (C). REQUIRED 2: Prepare journal entry to record company tax expense for 2021 REQUIRED 3: Enter ending balance in general ledger DTA and DTL account.