Question
During 2020, Waterway Co.s first year of operations, the company reports pretax financial income at $266,900. Waterways enacted tax rate is 45% for 2020 and
During 2020, Waterway Co.s first year of operations, the company reports pretax financial income at $266,900. Waterways enacted tax rate is 45% for 2020 and 20% for all later years. Waterway expects to have taxable income in each of the next 5 years. The effects on future tax returns of temporary differences existing at December 31, 2020, are summarized as follows.
Future Years | |||||||||||||||
2021 | 2022 | 2023 | 2024 | 2025 | Total | ||||||||||
Future taxable (deductible) amounts: | |||||||||||||||
Installment sales | $30,500 | $30,500 | $30,500 | $91,500 | |||||||||||
Depreciation | 5,700 | 5,700 | 5,700 | $5,700 | $5,700 | 28,500 | |||||||||
Unearned rent | (52,900) | (52,900) | (105,800) |
PART 1:
Complete the schedule below to compute deferred taxes at December 31, 2020. (Negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Deferred Tax | ||||||||||
Temporary Difference | Future Taxable (Deductible) Amounts | Tax Rate | (Asset) | Liability | ||||||
Installment sales | $91,500 | % | $ | $ | ||||||
Depreciation | 28,500 | % | $ | $ | ||||||
Unearned rent | (105,800) | % | $ | |||||||
Totals | $ | $ | $ |
PART 2:
Compute taxable income for 2020.
Taxable income for 2020 | $ |
PART 3:
Prepare the journal entry to record income taxes payable, deferred taxes, and income tax expense for 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Account Titles and Explanation | Debit | Credit |
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