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Kit Kat Ltd began operations in 2020. The following information is available for this company: Pretax financial income for 2020 is $289,771 Differences between the
Kit Kat Ltd began operations in 2020. The following information is available for this company: | ||||||||||||||
Pretax financial income for 2020 is $289,771 | ||||||||||||||
Differences between the 2020 income statement and tax return include: | ||||||||||||||
1. Depreciation on property, plant and equipment for financial reporting purposes, was $41,318. Depreciation | ||||||||||||||
on the tax return is $52,498 | ||||||||||||||
2. Interest revenue of $1,827 was recognized on an investment in tax-exempt municipal bonds | ||||||||||||||
3. Warranty expense accrued for financial reporting purposes was $2,785. Warranty expense per the tax return | ||||||||||||||
amounts to $1,500 | ||||||||||||||
4. Gross profit on construction contracts using the percentage-of-completion mehod was $73,500 | ||||||||||||||
Gross profit on construction projects for tax purposes was $65,208 | ||||||||||||||
5. A $1,500 fine paid for violation of OSHA safety regulations was deducted in computing pretax financial income | ||||||||||||||
6. The company has life insurance policies on its key persons. The premium expensed on the financial statements was $3,600 | ||||||||||||||
7. One of the executives covered by a key person policy was killed in a car accident. The company received a death | ||||||||||||||
payment of $75,000 from the insurance company, which the company reported as Other Income and Gains on its financial records. | ||||||||||||||
8. The applicable tax rate is 24% | ||||||||||||||
9 Taxable net income is expected in the net few years | ||||||||||||||
Instructions: (Round you calculations to the nearest whole dollar) | ||||||||||||||
a) For each of the differences above, calculate the dollar amount of the difference and identify if it is a temporary difference or pemanent difference | ||||||||||||||
b) Compute Taxable income for 2020 | ||||||||||||||
c) Compute the deferred tax asset and liabilities at December 31, 2020 that relate to the temporaty differences described above | ||||||||||||||
d) Prepare the journal entry to record income tax expense, deferred taxes and income tax payable for 2020 | ||||||||||||||
Leave any lines you don't need blank. Select the accounts from the dropdown list, which is in alphabetical order. | ||||||||||||||
If you accidently select an account in a row that you want blank, simply select that cell and press the DELETE key. | ||||||||||||||
Do not worry about indenting the account names to be credited | ||||||||||||||
Place any work you widh to show below the box containing Answer D |
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