Question

Allmond Corporation, organized on January 3, 2021, had pretax accounting income of $19 million and taxable income of $27 million for the year ended December 31, 2021. The 2021 tax rate is 25%. The only difference between accounting income and taxable income is estimated product warranty costs. Assume that expected payments and scheduled tax rates (based on recently enacted tax legislation) are as follows:

2022	$	4 million	30	%
2023		1 million	30	%
2024		1 million	30	%
2025		2 million	25	%

Required:
1. Determine the amounts necessary to record Allmond’s income taxes for 2021 and prepare the appropriate journal entry.
2. What is Allmond’s 2021 net income?

	($ in millions) Tax Rate % Tax $ Recorded as: Pretax accounting income $19.0 Warranty costs reversing in: 2022 x = 2023 x = 2024 x = 2025 x = Total deferred tax amount Income taxable in current year x =

Journal entry worksheet

• Record 2021 income taxes.

Note: Enter debits before credits

	Transaction General Journal Debit Credit 1

What is Allmond’s 2021 net income? (Round intermediate calculations to two decimal places.Enter your answer in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5). )

Answer 1

solictions Amount Tox rate Tax Recorded as $19 poetax accounting income whoranty costs reversing 2022 it s $1.2 to - 2023 2024 30% 30%. 30% is - a het et $0.3 $ous 2025 is 250 I $2.3 Potal defferred to amant Income taxable on in Current year Deffersed Y Tors assets income taxe. $27 x 25% $675 payable. General Journal I Debit I credit $u.us Income tax expense Deferred Tone assets Income Tax payable $ 2.3 $ 6.75 Allmands 2021 net income as Net income = $19 millions $4.45 millions = $14.55 millions.