Problem 10 [PPE, TTD-inverted] ABC's tax accounting methods and GAAP accounting methods are the same except for the method used to account for depreciation expense on property and equipment. Per GAAP. ABC recognizes depreciation expense over the economic life of the asset using the straight-line method. Per tax rules, ABC recognizes depreciation expense using the MACRS system. As a consequence, accumulated depreciation for GAAP was $13,000 at 12/31/2020. For tax, accumulated depreciation for tax was $22.000 at 12/31/2020. There were no purchases or sales of property and equipment during 2020. ABC's December 31, 2019 balance sheet showed a deferred tax liability in the amount of $1,050 pertaining to the tax able temporary difference that stems from the GAAP tax difference in the accounting for depreciation of property and equipment. ABC reports pretax GAAP earnings of $50,000 for the 12 months ended December 31, 2020. Embedded in pretax GAAP earnings is a $3,000 fine paid to the EPA for violation of federal environmental regulations. Required 1. Prepare the entries needed to record current and deferred income taxes at December 31, 2020. Assume a 21% corporate tax rate. Enter your entries below. Choose the account from the drop-down list in the yellow cell. Enter the amount of the entry in the green box. Account Debit Credit 1 1 1 1 1 1 1 Enter your answer to the following question in the green box What amount of net income will be reported on the 2020 income statement? 2 2 Columni . B c D Column1 Deferred income tax asset (Bal. Sht) Deferred income tax asset valuation allowance (Bal. Sht) Deferred income tax liability (Bal.Sht) Income tax payable (Bal.Sht) Liability for uncertain tax position (Bal. Sht) Income tax expense (Inc. Stmt) E TI Problem 10 [PPE, TTD-inverted] ABC's tax accounting methods and GAAP accounting methods are the same except for the method used to account for depreciation expense on property and equipment. Per GAAP. ABC recognizes depreciation expense over the economic life of the asset using the straight-line method. Per tax rules, ABC recognizes depreciation expense using the MACRS system. As a consequence, accumulated depreciation for GAAP was $13,000 at 12/31/2020. For tax, accumulated depreciation for tax was $22.000 at 12/31/2020. There were no purchases or sales of property and equipment during 2020. ABC's December 31, 2019 balance sheet showed a deferred tax liability in the amount of $1,050 pertaining to the tax able temporary difference that stems from the GAAP tax difference in the accounting for depreciation of property and equipment. ABC reports pretax GAAP earnings of $50,000 for the 12 months ended December 31, 2020. Embedded in pretax GAAP earnings is a $3,000 fine paid to the EPA for violation of federal environmental regulations. Required 1. Prepare the entries needed to record current and deferred income taxes at December 31, 2020. Assume a 21% corporate tax rate. Enter your entries below. Choose the account from the drop-down list in the yellow cell. Enter the amount of the entry in the green box. Account Debit Credit 1 1 1 1 1 1 1 Enter your answer to the following question in the green box What amount of net income will be reported on the 2020 income statement? 2 2 Columni . B c D Column1 Deferred income tax asset (Bal. Sht) Deferred income tax asset valuation allowance (Bal. Sht) Deferred income tax liability (Bal.Sht) Income tax payable (Bal.Sht) Liability for uncertain tax position (Bal. Sht) Income tax expense (Inc. Stmt) E TI
