Questions to be answered using the information from the screenshots:

1. As of December 31, 2019 compute the following two amounts, assuming that an election is made to carry back any operating losses to the fullest extent possible under the law:

a. Taxes receivable due to Net Operating Loss Carryback, if any

b. Deferred tax asset due to Net Operating Loss Carryforward, if any

2. Beginning with pre-tax book income and making adjustments necessary to arrive at taxable income, compute TEXAS's 2020 taxable income before considering any net operating loss carryforward from Part 1.

3. Compute TEXAS's 2020 current income tax expense after considering any NOL carryforward.

4. Determine the TOTAL amount that should be reported in the deferred tax asset and deferred tax liability accounts as of the end of 2020.

DTA DTL

5. FOR this question only, assume that the total deferred tax asset at 12/31/2019 was $15,000, and the total deferred tax liability at 12/31/2019 was $34,000. Prepare the journal entry necessary to properly record the tax expense for 2020, including both current and deferred tax expense.

Debit Credit

6. Using information given in question 5, what is TEXAS's effective tax rate for 2020?

This problem is a two-year cumulative problem. This means that (unless otherwise indicated) you are to assume that ending balances from 2019 become beginning balances for 2020 and that assumptions and facts pertain to both years. TEXAS Coal has the following partial comparative balance sheets: December 31, 2020 2019 Change Current Assets Accounts receivable 33,000 32,000 1,000 Prepaid expenses 10,000 4,000 6,000 Noncurrent Assets Property, plant and equipment 100,000 100,000 Accumulated depreciation (40,000) (20,000) (20,000) Net PPE 40,000 60,000 (20,000) Deferred tax asset non current ? ? Current Liabilities Unearned revenue 2,000 10,000 (8,000) Warranty liabilities 7,000 2,000 5,000 Noncurrent Liabilities Deferred tax liability - noncurrent 9 'P Contingent Loss Environmental Litigation 150,000 100,000 50,000 Additional information: 1. TEXAS was founded in 2000 and has December 31 scal and tax year ends. 2. TEXAS's taxable income for the last three years along with the tax rates for those years and rture years are as follows: Taxable Income Year Tax Rate (Loss) 2016 65% 100,000 201? 30% 80,000 2018 35% 42,000 2019 40% (90,000) 2020 30% ? 2021 30% ? 2022 30% ? thereafter 25% ? TEXAS wants to use the 2019 taxable loss as soon as possible to offset past and future income. At the time the operating loss was incurred, TEXAS's expected taxable income was $40,000 in 2020, $20,000 in 2021 and $50,000 in 2022. 3. TEXAS is on a cash basis for tax purposes except for xed assets. For tax purposes, xed assets are capitalized and depreciated using MACRS. In 2019 and 2020 the company accrued liabilities related to a lawsuit resulting from the release of coal ash slurry into a stream near its strip mine in Tennessee. These amounts are not deductible for tax purposes until paid. TEXAS plans to ght the lawsuit until appeals are exhausted. Because of this, the company does not expect to make payments related to the lawsuit until 2023 at the earliest. 4. The company owns equipment purchased on January 1, 2019 for $100,000. For book purposes, these assets are depreciated using straight-line depreciation over a ve-year life with no salvage value. For tax purposes, xed assets are depreciated under MACRS. 5. In 2020, TEXAS recorded pre-tax book income of $60,000. This included $8,000 of tax- free interest on municipal bonds and $5,000 of nes paid for violating environmental laws. 6. The following schedule shows the difference between tax depreciation and book depreciation for each year of the life of the equipment. 201 9 2020 021 2022 2023 Tax Depreciation 33,000 44,000 15,000 8,000 0 Accounting Depreciation 20,000 20,000 20,000 20,000 20,000 Difference (Tax Book) 13,000 24,000 (5,000) (12,000) (20,000)