During 2019, Holmes Co. reports pretax financial income at $762,300 and a taxable income of $668,700. Holmes’s enacted tax rate is 25% for 2019, 2020 and 2021 and 20% for all later years. Holmes expects to have taxable income in each of the next 5 years, but has determined a valuation allowance of $9,000 is necessary. The Company has a Deferred Tax Liability-PP&E with a beginning balance of $16,000 and Deferred Tax Liability-AFS Investments of $81,000. The effects on future tax returns of temporary differences existing at December 31, 2019, are summarized as follows. Future Years 2020 2021 2022 2023 2024 Total Future taxable/ deductible amounts: Installment sales $128,000 $168,750 $112,500 $97,000 $506,250 Depreciation 20,700 20,700 20,700 $20,700 $20,700 103,500 Unearned rent 115,800 115,800 115,800 347,400 INSTRUCTIONS: Prepare the journal entry to record income tax expense, deferred taxes, and income taxes payable at December 31, 2019. (Show all supporting computations. You must evaluate each temporary difference individually and establish a deferred tax account for each, including in your adjusting journal entry.)
During 2019, Holmes Co. reports pretax financial income at $762,300 and a taxable income of $668,700. Holmes’s enacted tax rate is 25% for 2019, 2020 and 2021 and 20% for all later years. Holmes expects to have taxable income in each of the next 5 years, but has determined a valuation allowance of $9,000 is necessary. The Company has a Deferred Tax Liability-PP&E with a beginning balance of $16,000 and Deferred Tax Liability-AFS Investments of $81,000. The effects on future tax returns of temporary differences existing at December 31, 2019, are summarized as follows. Future Years 2020 2021 2022 2023 2024 Total Future taxable/ deductible amounts: Installment sales $128,000 $168,750 $112,500 $97,000 $506,250 Depreciation 20,700 20,700 20,700 $20,700 $20,700 103,500 Unearned rent 115,800 115,800 115,800 347,400 INSTRUCTIONS: Prepare the journal entry to record income tax expense, deferred taxes, and income taxes payable at December 31, 2019. (Show all supporting computations. You must evaluate each temporary difference individually and establish a deferred tax account for each, including in your adjusting journal entry.)
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 14P
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Question
During 2019, Holmes Co. reports pretax financial income at $762,300 and a taxable income of $668,700. Holmes’s enacted tax rate is 25% for 2019, 2020 and 2021 and 20% for all later years. Holmes expects to have taxable income in each of the next 5 years, but has determined a valuation allowance of $9,000 is necessary. The Company has a Deferred Tax Liability -PP&E with a beginning balance of $16,000 and Deferred Tax Liability-AFS Investments of $81,000. The effects on future tax returns of temporary differences existing at December 31, 2019, are summarized as follows.
Future Years
2020
2021
2022
2023
2024
Total
Future taxable/ deductible amounts:
Installment sales
$128,000
$168,750
$112,500
$97,000
$506,250
Depreciation
20,700
20,700
20,700
$20,700
$20,700
103,500
Unearned rent
115,800
115,800
115,800
347,400
INSTRUCTIONS:
Prepare the journal entry to record income tax expense, deferred taxes , and income taxes payable at December 31, 2019. (Show all supporting computations. You must evaluate each temporary difference individually and establish a deferred tax account for each, including in your adjusting journal entry. )
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