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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.
Prepare journal entries to record income taxes in all 4 years. Assume that the change in the tax rate to 20% was not enacted until the beginning of 2021. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit 2020 Income Tax Expense 103110 Deferred Tax Liability 36610 Income Tax Payable 66500 2021 Income Tax Expense 15690 Deferred Tax Liability 15690 (To record the adjustment for the decrease in the enacted tax rate.) Income Tax Expense 74720 Deferred Tax Liability 27520 Deferred Tax Liability 27520 Income Tax Payable 47200 (To record income taxes for 2021.) 2022 Income Tax Expense 78120 Deferred Tax Liability 22520 Income Tax Payable 55600 2023 Income Tax Expense 95520 Deferred Tax Liability 11480 Income Tax Payable 107000 Prepare the income statement for 2021, beginning with income before income taxes. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Vaughn Company Income Statement (Partial) For the Year Ended December 31, 2021 Income before Income Taxes $ Income Tax Expense Deferred $ Current > AdjustmentStep by Step Solution
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