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The following information was disclosed during the audit of Cullumber Inc. 1. Year Amount Due per Tax Return 2020 $134,300 2021 101,500 2. On January
The following information was disclosed during the audit of Cullumber Inc.
1. | Year | Amount Due per Tax Return | ||
2020 | $134,300 | |||
2021 | 101,500 |
2. | On January 1, 2020, equipment costing $599,900 is purchased. For financial reporting purposes, the company uses straight-line depreciation over a 5-year life. For tax purposes, the company uses the elective straight-line method over a 5-year life. (Hint: For tax purposes, the half-year convention as discussed in Appendix 11A must be used.) | |
3. | In January 2021, $231,300 is collected in advance rental of a building for a 3-year period. The entire $231,300 is reported as taxable income in 2021, but $154,200 of the $231,300 is reported as unearned revenue in 2021 for financial reporting purposes. The remaining amount of unearned revenue is to be recognized equally in 2022 and 2023. | |
4. | The tax rate is 20% in 2020 and all subsequent periods. (Hint: To find taxable income in 2020 and 2021, the related income taxes payable amounts will have to be grossed up.) | |
5. | No temporary differences existed at the end of 2019. Cullumber expects to report taxable income in each of the next 5 years. |
Draft the income tax section of the income statement for 2021, beginning with Income before income taxes.
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