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The following information was disclosed during the audit of Pearl Inc. The following information was disclosed during the audit of Pearl Inc. Amount Due per
The following information was disclosed during the audit of Pearl Inc.
The following information was disclosed during the audit of Pearl Inc. Amount Due per Tax Return 1. Year 2020 $130,000 2021 109,000 2. On January 1, 2020, equipment costing $586,100 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.) In January 2021, $215,100 is collected in advance rental of a building for a 3-year period. The entire $215,100 is reported as taxable income in 2021, but $143,400 of the $215,100 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. 3. 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. Pearl expects to report taxable income in each of the next 5 years. (a) Determine the amount to report for deferred income taxes at the end of 2020, and indicate how it should be classified on the balance sheet. Amount to report for deferred income taxes $ Pearl Inc. Balance Sheet December 31, 2020 $ Save for Later Last saved 2 days ago Attempts: 0 of 3 used Submit Answer Saved work will be auto-submitted on the due date. Auto- submission can take up to 10 minutesStep by Step Solution
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