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. You are the accountant for ADO Corporation, and you have to prepare the journal for income taxes. You have gathered the following information for
. You are the accountant for ADO Corporation, and you have to prepare the journal for income taxes. You have gathered the following information for 2020:
- Pretax financial income (i.e., pretax GAAP income) is $520,000.
- The tax rate for 2020 is 40%.
- Depreciation expense on the tax return is $13,000 greater than on the GAAP income statement.
- One of the corporations executives died in a plane crash. ADO received life insurance benefits of $40,000.
- Rent revenue on the tax return (i.e., rent collected) is $35,000 higher than rent revenue (i.e., rent earned) on the GAAP income statement.
Instructions
(a) Compute taxable income. Clearly list all differences between pretax financial and taxable income, and indicate whether they are permanent or temporary.
(b) Prepare the journal entry to record income taxes for 2020.
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