Recording Multiple Temporary Differences

The records of Anderson Inc. provide the following information for the tax year 2020.

• There was no beginning balance in deferred tax account(s).
• Taxable income for 2020 was $168,000.
• Tax rate is 25%.
• Three temporary differences were identified:
  • Estimated litigation accrual of $56,000, not deductible for tax purposes. Settlement not expected to take place until 2022.
  • Excess of accelerated depreciation over GAAP depreciation of $33,600 caused a difference in the $140,000 GAAP basis and the 106,400 tax basis of equipment. One-third of the difference will reverse in 2021.
  • Unrealized holding gain on equity securities of $9,800 not recognized for tax purposes. Anderson Inc. intends to sell the security in early 2021. The investment (accounted for under FV-NI) is reported at its fair value of $28,000 at year-end in its financial statements.
• a. Record the income tax journal entry on December 31, 2020
• b. Record the income tax journal entry on December 31, 2021, assuming taxable income of $350,000.