Question

Pina Company reports pretax financial income of $74,100 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 $15,800.
2.		Rent collected on the tax return is greater than rent recognized on the income statement by $23,200.
3.		Fines for pollution appear as an expense of $11,000 on the income statement.

Pina’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.

Taxable income		$enter a dollar amount
Income taxes payable		$enter a dollar amount

  

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.)

Account Titles and Explanation	Debit	Credit
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount

Answer 1

Current Tax Computation for 2020	$
Pretax financial Income for 2020	74,100
Less: Additional depreciation under taxation	-15,800
Add: Additional rent income to be taxed	23,200
Add: Fines are not allowed as deduction under taxation	11,000
Taxable Income for 2020	92,500
Income Tax payable @ 30% (92,500 x 30%)	27,750
Deferred Tax Computation for 2020	$	DTA/DTL
Additional depreciation under taxation	15,800	DTL
Additional rent income to be taxed	23,200	DTA		Rough
Excess of temporary taxable income over expenses	7,400	DTA (net)		23200-15800=7400
Deferred Tax Assets (net) @ 30% of 7,400	2,220	DTA
Journal Entry for 2020
	$	$
Income Tax expenses	25,530
Deferred Tax Assets	2,220
Income Tax Payable		27,750
(or)
	$	$
Income Tax expenses	27,750
Income Tax Payable		7,400
Deferred Tax Assets	2,220
Income Tax expenses		2,220