Question
In 2020, the first year a company was in business, the following schedule was created: 2020 Book Income 3,000 Temporary difference #1 (300) Temporary difference
In 2020, the first year a company was in business, the following schedule was created:
2020 Book Income 3,000
Temporary difference #1 (300)
Temporary difference #2 300
2020 Taxable Income 3,000
Temporary difference #1 will reverse itself out by 100 a year for the next 3 years (2021-2023).
Temporary difference #2 will reverse itself out by 75 a year for the next 4 years (2021-2024).
The applicable tax rate was 20% for all years, and the company prepared the appropriate entry and created a DTA for 60 and a DTL for 60.
Now it is 2021. Book income in 2021 is 3,000. Taxable income in 2021 is 3,025, as summarized by the following schedule.
2021 Book Income 3,000
Temporary difference #1 reversing 100
Temporary difference #2 reversing (75)
2021 Taxable Income 3,025
The tax rate is still 20%. There is still 200 left to reverse on temporary difference #1 and 225 left on temporary difference #2.
What would the company's 2021 year end entry for taxes look like? Items listed below are not necessarily the order they appear when creating the journal entry):
When you provide your answer, there is a series of 8 questions:
- Income tax expense is a debit or credit?
- The dollar amount for income tax expense is? (fill in the blank)
- The DTA will need to be adjusted with a debit or a credit?
- The dollar amount for the adjustment to DTA is? (fill in the blank)
- The DTL will need to be adjusted with a debit or a credit?
- The dollar amount for the adjustment to DTL is? (fill in the blank)
- Income tax payable is a debit or a credit?
- The dollar amount for income tax payable is? (fill in the blank)
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