Button Company has the following two temporary differences between its income tax expense and income taxes payable. 00202000) 00202100) 00202200) Pretax financial income $840,000) $910,000) $945,000) Excess depreciation expense on tax return (30,000) (40,000) (10,000) Excess warranty expense in financial income 0020,000) 0010,000) 0008,000) Taxable income $830,000) $880,000) $943,000) The income tax rate for all years is 20%. Instructions a. Assuming there were no temporary differences prior to 2020, prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020, 2021, and 2022. b. Indicate how deferred taxes will be reported on the 2022 balance sheet. Button's product warranty is for 12 months. c. Prepare the income tax expense section of the income statement for 2022, beginning with the line “Pretax financial income.”
Button Company has the following two temporary differences between its income tax expense and income taxes payable. 00202000) 00202100) 00202200) Pretax financial income $840,000) $910,000) $945,000) Excess depreciation expense on tax return (30,000) (40,000) (10,000) Excess warranty expense in financial income 0020,000) 0010,000) 0008,000) Taxable income $830,000) $880,000) $943,000) The income tax rate for all years is 20%. Instructions a. Assuming there were no temporary differences prior to 2020, prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020, 2021, and 2022. b. Indicate how deferred taxes will be reported on the 2022 balance sheet. Button's product warranty is for 12 months. c. Prepare the income tax expense section of the income statement for 2022, beginning with the line “Pretax financial income.”
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter3: Taxes On The Financial Statements
Section: Chapter Questions
Problem 12P
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Question
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Button Company has the following two temporary differences between its income tax expense and income taxes payable.
|
00202000)
|
00202100)
|
00202200)
|
|
| Pretax financial income |
$840,000)
|
$910,000)
|
$945,000)
|
| Excess |
(30,000)
|
(40,000)
|
(10,000)
|
| Excess warranty expense in financial income |
0020,000)
|
0010,000)
|
0008,000)
|
| Taxable income |
$830,000)
|
$880,000)
|
$943,000)
|
The income tax rate for all years is 20%.
Instructions
a. Assuming there were no temporary differences prior to 2020, prepare the
b. Indicate how
c. Prepare the income tax expense section of the income statement for 2022, beginning with the line “Pretax financial income.”
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