Question

Windsor 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.

Windsor’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.

(a) Compute taxable income and income taxes payable for 2020.

(b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

(c) Prepare the income tax expense section of the income statement for 2020, beginning with the line “Income before income taxes.” (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

(d) Compute the effective income tax rate for 2020. (Round answer to 1 decimal places, e.g. 25.5%.)

Answer 1

Answer o @. compute taxable income and incorne bores payable for 2000: Taxable income = pre tar financial income – Excess depreciation allowed under Excess rcot collected tan return t in tat return +fires for pollution[disallowed as of illegal nature). = $72,000 - $14,700+$ 24,200 + $ 11,900 = $93,400 - Taxable income for 2.30 = 93,400 income tants payable ? in comie -ax. payable = Texable income x Tar vake = $93,400x 304 = $ 8020 - income foxes payable for sowo =$ 38,950

☺ prepare the Joumal Erties : Ca General Journal Debit (1) Credit (f) income statement $25.60 7260 $283020 Debored Tax asset ($34,300 X 304) smo.com.domes pagable Defrired-tax liability (14,400 x 30-:) ☺ income statement for Dodo (partiallo $4410 Amaunch 112 Amount (5) $10.000 varovane ... income before fades. Lesss incom.taz Eupene income. Hoxes.fayable Amount (1.4oOTL Amount or to DFA $28,020 $4410 1-52260 $ 25,140 Net income after Tales $ 46,830 d. compute Effretive income tax rate for 2000! Elfzetive income tax rate - incom Tom Expense yccognised in incomestante pre tax financial income

Elfective income tax rate : $25,190 2X100 572,000 = 35104 a'ueffective income tax rate for 2020 = 35.01.)