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Luxley Corporation has $150,000 of income before taxes in its 2020 accounting records. In computing income tax expense, Luxley makes the following observations of differences

Luxley Corporation has $150,000 of income before taxes in its 2020 accounting records. In computing income tax expense, Luxley makes the following observations of differences between the accounting records and the tax return: 1. An accelerated depreciation method is used for tax purposes. In 2020, Luxley reports $12,000 more depreciation expense for tax purposes than it shows in the accounting records. The excess depreciation is expected to reverse in 2023. 2. In 2020, Luxley collected $120,000 from a business that is renting a portion of its warehouse. The $120,000 covers the rental payment for the four years 2021-2024, and therefore no rental revenue has been recognized for 2020. However, XYZ must pay taxes on the entire amount collected in 2020. The enacted tax rate in 2020 is 21%. It is 23% in 2021 and in 2022, and is 24% in 2023 and years following. Required: a. Calculate taxable income for 2020. b. Prepare the journal entry necessary to record income taxes at the end of 2020. c. How would any deferred tax amounts be reported on a classified balance sheet? d. Assume that Luxleys 2021 pretax accounting income is $27,000 and that Luxley reports $6,000 more depreciation expense for tax purposes than it shows in the accounting records, expected to reverse in 2024. Also during 2021, Luxley invests in tax-free municipal bonds that earn $9,000 interest in 2021. Prepare the journal entry necessary to record income taxes at the end of 2021. e. What is the amount of net income or loss that Luxley would report on its 2021 income statement and how will it be reported?

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