Answered: Ehrlich Corporation prepared the…

Ehrlich Corporation prepared the following reconciliation for its first year of operations: Pretax financial income for 2021 $2,550,000 Excess depreciation expense (450,000) Taxable income

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter14: Taxes On The Financial Statements

Section: Chapter Questions

Problem 4BCRQ

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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

12)

Ehrlich Corporation prepared the following reconciliation for its first year of operations:

Pretax financial income for 2021 $2,550,000

Excess depreciation expense (450,000)

Taxable income $2,100,000

The temporary difference will reverse evenly over the next two years at an enacted tax rate of 30%. The enacted tax rate for 2021 is 20%. Prepare the journal entry for the income taxes for 2021

Definition Definition Method of recording financial transactions in the book of original entry by debiting and crediting the accounts affected by a transaction using the golden rules of accrual accounting.

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