Question

Part I: Sass Corp. is in its first year of operation. The company has pretax financial income of $50,000 The company has the following items recorded in its records. No estimated tax payments were made during 2020. temporay diffe deated 2,300 Premium of life insurance for its key officers 17,500 Tax depreciation in excess of book depreciation 100,000 Interest on municipal bonds 5,800 warranty.cos --Warranty expense 6,500 LActual warranty repairs 4,200 -Bad debt expense Yo 2,200 Beginning balance in allowances for uncollectible accounts LEnd balance in allowances for uncollectible accounts Tax rates for 2020 and future years 20% INSTRUCTIONS: (a) Determine taxable income for 2020. (b) Prepare the journal entry to record income taxes for 2020. (c) Prepare the income tax expense section of the income statement for the year ended Dec. 31, 2020. Center (10ole debit por now 4 CE

Answer 1

Onscoer: Given that insurance for its key Premium of life offers -17500 Tax depreciation in Exces of book depreciation - 100000 Interest on municipal bonds - 5806 Cesavranty Expense - 6500 Actual warranty riepalys – 4900 Bad debt Expense - 2200. as given Pretar financial income -- 50000 un Collectible accounts - 900 actual warranty sepairs.- The actual warranty repairs have been inccurred & the same has been deducted

in for boolcs of Qorriving accounts, no adjustment is sequined at farable income for this adjustment. Bad debt 24 Expense: is assumed that in previores to taxe. Years & the income cous offered Alood, we can calculate taxable income as 50000 + 17500 - 100000 +5800+6500 + 900-19300 hitamable incomez - 19300 And in & actual the same Expense shall uncollectible accounts is made has not been incurred be added back.

2020 Particulars Pre face financial income 50000 17500 - 100006 5800 Life insurance poremium Excers depreciation of per taxe Interest on municipal bonds Cavantes Expense Actual carranty Expense Bad debt Expense 6500 as said in above uncollectible account .900 Treable income -19 300 So, loss in in cwued because if negative by As determined above negative so, no Entsy . for taxable income is encome tax payable.

Here, Defeoved fare liability - 100000 x 20 to = 20000 to de ferred Have Expeuse Ale = 20000 Cto Core at DTL on depreciation) . NOW, We Can - Calculate de ferred tave Expense 410 as below 30700 x 200% = 6140 A to deferred tar bability = 6140