Question

Windsor Company reports pretax financial income of $71,400 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 $16,800.
2.		Rent collected on the tax return is greater than rent recognized on the income statement by $23,700.
3.		Fines for pollution appear as an expense of $10,900 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.

Compute taxable income and income taxes payable for 2020.

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

Compute the effective income tax rate for 2020.

Windsor Company reports prstax financial income of $71,400 for 2020. The following items cause table income to be different than pretax financial income 1. Depreciation on the tax return is greater than depreciation on the income statement by $16,800. 2. Rent collected on the tax return is greater than rent recognized on the income statement by $22,700. 3. Fines for pollution appear as an expense of $10,900 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. Computs taxable income and income taxes payable for 2020. Tacble income Income taxes payable S e Textbook and Media List of Accounts Prepare the journal entry to record income tax expense, deferred income taxes, and income taxas 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 for the amounts.) Account Titles and Explanation Debit Credit e Textbook and Media List of Accounts 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 numbereg.-45 or parentheses eg (451) Windsor Company Income Statement (Partial) e Textbook and Media List of Accounts Computs the effective income tax rats for 2020. (Round answer to 1 decimal places, eg 25.5%.) Effective income tax rate

Answer 1

1)

Taxable income	$89,200
Income taxes payable	$26,760

Explanation:-

Pretax financial income for 2020	$71,400
Excess depreciation per tax return	($16,800)
Excess rent collected over rent earned	$23,700
Nondeductible fines	$10,900
Taxable income	$89,200
Taxable income	$89,200
Enacted tax rate	30%
Income tax payable	$26,760

2)

Account Titles and explanations	Debit	Credit
Income tax expense	$22,920 (Bal. Figure)
Deferred tax assets	$7,110 ($23,700 ×30%)
Income tax payable		$26,760
Deferred tax liability		$3,270 ($10,900 ×30%)
(Being income tax expense, deferred income taxes and income tax payable recorded)

3)

Windsor company
Income statement ( Partial)
Year ended December 31,2020
Income before income taxes		$71,400
Income tax expense:
Current	$26,760
Deferred ($7,110 - $3,270)	($3,840)
		$22,920
Net income/(loss)		$48,480

4)

Effective income tax rate

32.1%

Explanation:-

$22,920/$71,400 = 0.321 ; 0.321 ×100 = 32.1%