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The pretax financial income of Vaughn Company differs from its taxable income throughout each of 4 years as follows. Year Pretax Financial Income Taxable Income
The pretax financial income of Vaughn Company differs from its taxable income throughout each of 4 years as follows.
Year | Pretax Financial Income | Taxable Income | Tax Rate | ||||
2020 | $264,000 | $190,000 | 35 | % | |||
2021 | 343,000 | 236,000 | 20 | % | |||
2022 | 360,000 | 278,000 | 20 | % | |||
2023 | 447,000 | 535,000 | 20 | % |
Pretax financial income for each year includes a nondeductible expense of $30,600 (never deductible for tax purposes). The remainder of the difference between pretax financial income and taxable income in each period is due to one depreciation temporary difference. No deferred income taxes existed at the beginning of 2020.
Date Account Titles and Explanation Debit Credit 2020 Income Tax Expense 103110 Deferred Tax Liability 36610 Income Tax Payable 66500 2021 Income Tax Expense 5230 Deferred Tax Liability 5230 (To record the adjustment for the decrease in the enacted tax rate.) Income Tax Expense 149440 Deferred Tax Liability 55040 Income Tax Payable 9400 (To record income taxes for 2021.) 2022 Income Tax Expense 156240 Deferred Tax Liability 45040 Income Tax Payable 111200 2023 Income Tax Expense 191040 Deferred Tax Liability 22960 Income Tax Payable 214000Step by Step Solution
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