Marigold Company reports pretax financial income of $72,000 for 2020. The following items cause taxable income to be different than pretax financial income.1.Depreciation on the tax return is greater than depreciation on the income statement by $14,700.2.Rent collected on the tax return is greater than rent recognized on the income statement by $24,200.3.Fines for pollution appear as an expense of $11,900 on the income statement.Marigold’s tax rate is 30% for all years, and the company expects to report taxable income in all future years. There are no deferred taxes at the beginning of 2020Compute taxable income and income taxes payable for 2020.Taxable income?Income taxes payable?Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020.?Prepare the income tax expense section of the income statement for 2020, beginning with the line “Income before income taxes.

Question
Asked Oct 10, 2019

Marigold Company reports pretax financial income of $72,000 for 2020. The following items cause taxable income to be different than pretax financial income.

1.

Depreciation on the tax return is greater than depreciation on the income statement by $14,700.
2.

Rent collected on the tax return is greater than rent recognized on the income statement by $24,200.
3.

Fines for pollution appear as an expense of $11,900 on the income statement.

Marigold’s tax rate is 30% for all years, and the company expects to report taxable income in all future years. There are no deferred taxes at the beginning of 2020

Compute taxable income and income taxes payable for 2020.

Taxable income?

Income taxes payable?

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020.?

Prepare the income tax expense section of the income statement for 2020, beginning with the line “Income before income taxes.

 

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Step 1

Compute taxable income and income taxes payable for 2020.

Current
Future taxable amount
Deferred
Deferred
year
2020
Liability
asset
Financial income
Temporary difference:
$72,000
$(14,700)
$14,700
Excess tax
depreciation
$24,200 S(24,200)
$11.900
Excess rent collected
Fines for pollution
(permanent)
$93,400 S(24,200)
30%
Taxable income
14,700
Multiply: Tax rate
Income tax payable
30%
30%
28,020
(7,260)
4,410
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Current Future taxable amount Deferred Deferred year 2020 Liability asset Financial income Temporary difference: $72,000 $(14,700) $14,700 Excess tax depreciation $24,200 S(24,200) $11.900 Excess rent collected Fines for pollution (permanent) $93,400 S(24,200) 30% Taxable income 14,700 Multiply: Tax rate Income tax payable 30% 30% 28,020 (7,260) 4,410

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Step 2

Prepare the journal entry to record income tax expense, deferred inc...

Debit
Post
Credit
Account Title and Explanation
Date
(S)
Ref.
(S)
25,170
7,260
Income Tax Expense (Bal. figure)
2020
Deferred Tax Asset
Deferred Tax Liability
Income Tax Payable
(To record the income tax provision
for 2020)
4,410
28,020
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Debit Post Credit Account Title and Explanation Date (S) Ref. (S) 25,170 7,260 Income Tax Expense (Bal. figure) 2020 Deferred Tax Asset Deferred Tax Liability Income Tax Payable (To record the income tax provision for 2020) 4,410 28,020

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