Concord Corp. sold an investment on an installment basis. The total gain of $85,200 was reported for financial reporting purposes in the period of sale. The company qualifies to use the installment-sales method for tax purposes. The installment period is 3 years; one- third of the sale price is collected in the period of sale. The tax rate was 40% in 2020, and 20% in 2021 and 2022. The 20% tax rate was not enacted in law until 2021. The accounting and tax data for the 3 years is shown below. Calculate cumulative temporary differences for years 2020-2022. (Negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) 2020 (40% tax rate). Income before temporary difference Temporary difference Income 2021 (20% tax rate). Income before temporary difference Temporary difference Income Financial Accounting Tax Return $99,400 $99,400 85,200 28,400 $184,600 $127,800 Cumulative temporary difference $ 2020 Calculate current tax expense for years 2020-2022. 56800 Current tax expense for 2020 $ 51120 Current tax expense for 2021 $ 25560 Current tax expense for 2022 $ 25560 $99,400 $99,400 0 28,400 Calculate deferred tax expense for 2020-2022. $99,400 $127,800 Deferred tax expense for 2020 $ 20448 Deferred tax benefit for 2021 $ (15336) 2022 (20% tax rate) Income before temporary difference $99,400 $99,400 Deferred tax benefit for 2022 $ 15336 Temporary difference 0 28,400 Income $99,400 $127,800 2021 28400 $ 2022 0
Concord Corp. sold an investment on an installment basis. The total gain of $85,200 was reported for financial reporting purposes in the period of sale. The company qualifies to use the installment-sales method for tax purposes. The installment period is 3 years; one- third of the sale price is collected in the period of sale. The tax rate was 40% in 2020, and 20% in 2021 and 2022. The 20% tax rate was not enacted in law until 2021. The accounting and tax data for the 3 years is shown below. Calculate cumulative temporary differences for years 2020-2022. (Negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) 2020 (40% tax rate). Income before temporary difference Temporary difference Income 2021 (20% tax rate). Income before temporary difference Temporary difference Income Financial Accounting Tax Return $99,400 $99,400 85,200 28,400 $184,600 $127,800 Cumulative temporary difference $ 2020 Calculate current tax expense for years 2020-2022. 56800 Current tax expense for 2020 $ 51120 Current tax expense for 2021 $ 25560 Current tax expense for 2022 $ 25560 $99,400 $99,400 0 28,400 Calculate deferred tax expense for 2020-2022. $99,400 $127,800 Deferred tax expense for 2020 $ 20448 Deferred tax benefit for 2021 $ (15336) 2022 (20% tax rate) Income before temporary difference $99,400 $99,400 Deferred tax benefit for 2022 $ 15336 Temporary difference 0 28,400 Income $99,400 $127,800 2021 28400 $ 2022 0
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter13: Corporations: Earning & Profits And Distributions
Section: Chapter Questions
Problem 12P
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Question
Transcribed Image Text:Concord Corp. sold an investment on an installment basis. The total gain of $85,200 was reported for financial reporting purposes in
the period of sale. The company qualifies to use the installment-sales method for tax purposes. The installment period is 3 years; one-
third of the sale price is collected in the period of sale. The tax rate was 40% in 2020, and 20% in 2021 and 2022. The 20% tax rate was
not enacted in law until 2021. The accounting and tax data for the 3 years is shown below.
Calculate cumulative temporary differences for years 2020-2022. (Negative amounts using either a negative sign preceding the
number e.g. -45 or parentheses e.g. (45).)
2020 (40% tax rate).
Income before temporary difference
Temporary difference
Income
2021 (20% tax rate).
Income before temporary difference
Temporary difference
Income
Financial Accounting
Tax Return
$99,400
$99,400
85,200
28,400
$184,600
$127,800
Cumulative temporary
difference
$
2020
Calculate current tax expense for years 2020-2022.
56800
Current tax
expense
for 2020
$
51120
Current tax
expense
for 2021
$
25560
Current tax expense
for 2022
$
25560
$99,400
$99,400
0
28,400
Calculate deferred tax expense for 2020-2022.
$99,400
$127,800
Deferred tax expense
for 2020
$
20448
Deferred tax
benefit
for 2021
$
(15336)
2022 (20% tax rate)
Income before temporary difference
$99,400
$99,400
Deferred tax
benefit
for 2022
$
15336
Temporary difference
0
28,400
Income
$99,400
$127,800
2021
28400
$
2022
0
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