Question
Treat Yourself, Inc. began operations in 2020. Taxable income and pretax financial income would be identical for Treat Yourself, Inc. during 2020 except for (1)
Treat Yourself, Inc. began operations in 2020. Taxable income and pretax financial income would be identical for Treat Yourself, Inc. during 2020 except for (1) the recognition of sales revenue on installment sales, (2) political contributions, and (3) depreciation expense. The table below shows the companys calculations of pre-tax (GAAP) financial income as well as additional tax-related information, including the expected average tax rates each year:
GAAP Calculations: | 2020 | 2021 | 2022 |
Revenues minus expenses (excluding the items below) | $265,000 | $335,000 | $490,000 |
Installment sales revenue | 80,000 | -0- | -0- |
Political contribution expense | (15,000) | (15,000) | (15,000) |
Depreciation expense | (60,000) | (50,000) | (45,000) |
Pre-tax (GAAP) Financial Income | $270,000 | $270,000 | $430,000 |
Tax-related information: | 2020 | 2021 | 2022 |
Taxable installment sales collections | 20,000 | 35,000 | 25,000 |
Deductible depreciation | (100,000) | (20,000) | (35,000) |
Average tax rates | 25% | 28% | 30% |
The installment sales revenue recognized in 2020 is taxable as shown in the 'tax-related information' above. The political contribution expense is not tax deductible. Tax deductions for depreciation differ from depreciation expense and are also shown above. All tax rates shown above were enacted into law on January 1, 2020.
Which of the following will Treat Yourself record related to income taxes during 2020? Mark all that apply.
DEBIT: Current Income Tax Expense
DEBIT: Deferred Income Tax Expense
DEBIT: Deferred Tax Asset
CREDIT: Current Income Tax Expense
CREDIT: Income Taxes Payable
CREDIT: Deferred Tax Liability
CREDIT: Deferred Income Tax Expense
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