Question
Harry Potter Inc., information for 2019: 1. Depreciation reported on the tax return exceeded depreciation reported on the income statement by $75,000. This difference will
Harry Potter Inc., information for 2019:
1. Depreciation reported on the tax return exceeded depreciation reported on the income statement by $75,000.
This difference will reverse in equal amounts of $25,000 over the years 20202021 .
2. Interest received on municipal bonds was $24,000. 3. Rent collected in advance on January 1, 2019, totaled $45,000 for a 3-year period. Of this amount, $30,000 was reported as unearned at December 31, 2019, for book purposes.
4. The tax rates are 20% for 2019 and 30% for 2020 and subsequent years. 5. Income taxes of $270,000 are due per the tax return for 2019.
6. No deferred taxes existed at the beginning of 2019.
Required
(a) Compute taxable income for 2019.
(b) Compute pretax financial income for 2019.
(c) Prepare the journal entries to record income tax expense, deferred income taxes, and income taxes payable for 2019 and 2020. Assume taxable income was $760,000 in 2019 (d) Prepare the income tax expense section of the income statement for 2019 , beginning with Income before income taxes.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started