Required: А. Calculate taxable income for 2020. В. Prepare the journal entry necessary to record income taxes at the end of 2020. С. How would any deferred tax amounts be reported on a classified balance sheet?

Required: А. Calculate taxable income for 2020. В. Prepare the journal entry necessary to record income taxes at the end of 2020. С. How would any deferred tax amounts be reported on a classified balance sheet?

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter14: Taxes On The Financial Statements

Section: Chapter Questions

Problem 32P

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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

Required:
А.
Calculate taxable income for 2020.
В.
Prepare the journal entry necessary to record income taxes at the end of 2020.
С.
How would any deferred tax amounts be reported on a classified balance sheet?

Expert Solution

Step 1

Part A)

Calculation of taxable income for 2020

A formulation for the above-

Step 2

Part B)

Journal entries-

Note-

Deferred tax asset = Difference between the income calculated as per companies books of accounts and income calculated by the authorities of tax.

Therefore Rental Revenue – Depreciation Expenses * Tax Rate

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