Problem 19-09 Skysong Company began operations at the beginning of 2021. The following information pertains to this
Question:
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Problem 19-09
Skysong Company began operations at the beginning of 2021. The following information pertains to this company.
1.Pretax financial income for 2021 is $85,000.
2.The tax rate enacted for 2021 and future years is 20%.
3.Differences between the 2021 income statement and tax return are listed below:
(a)Warranty expense accrued for financial reporting purposes amounts to $6,900. Warranty deductions per the tax return amount to $2,100.
(b)Gross profit on construction contracts using the percentage-of-completion method per books amounts to $90,200. Gross profit on construction contracts for tax purposes amounts to $73,000.
(c)Depreciation of property, plant, and equipment for financial reporting purposes amounts to $64,300. Depreciation of these assets amounts to $76,900 for the tax return.
(d)A $3,300 fine paid for violation of pollution laws was deducted in computing pretax financial income.
(e)Interest revenue recognized on an investment in tax-exempt municipal bonds amounts to $1,400.
4.Taxable income is expected for the next few years. (Assume (a) is short-term in nature; assume (b) and (c) are long-term in nature.)
Compute taxable income for 2021.
Compute the deferred taxes at December 31, 2021, that relate to the temporary differences described above.
Deferred Tax Liability ?
Deferred Tax Asset ?
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