The records of Anderson Inc. provide the following information for the current tax year. There was no
Question:
The records of Anderson Inc. provide the following information for the current tax year. There was no beginning balance in deferred tax account(s). Taxable income for the year was $60,000. Tax rate is 25%. Three temporary differences were identified: 1. Estimated litigation accrual of $20,000, not deductible for tax purposes. Settlement not expected to take place for two years. 2. Excess of accelerated depreciation over GAAP depreciation of $12,000 caused a difference in the $50,000 GAAP basis and the $38,000 tax basis of equipment. One-third of the difference will reverse next year. 3. Unrealized holding gain on equity securities of $3,500 not recognized for tax purposes. Anderson Inc. intends to sell the security in the first part of next year. The investment (accounted for under FV-NI) is reported at its fair value of $10,000 at year-end in its financial statements. a. Record the income tax journal entry on December 31 of the current year. Note: If a line in a journal entry isn't required for the transaction, select "N/A" as the account name and leave the Dr. and Cr. answers blank (zero). b. Record the income tax journal entry on December 31 of the following year assuming taxable income of $125,000. Note: If a line in a journal entry isn't required for the transaction, select "N/A" as the account name and leave the Dr. and Cr. answers blank (zero).