Question

2. Problem 19-04 The accounting records of Flounder Inc. show the following data for 2020 (its first year of operations). 1. Life insurance expense on officers was $9,900. Equipment was acquired in early January for $288,000. Straight-line depreciation over a 5-year life is used, with no salvage value. For tax purposes, Flounder used a 30% rate to calculate depreciation. 3. Interest revenue on State of New York bonds totaled $4,300. Product warranties were estimated to be $51,100 in 2020. Actual repair and labor costs related to the warranties in 2020 were $9,300. The remainder is estimated to be paid evenly in 2021 and 2022. 5. Gross profit on an accrual basis was $110,000. For tax purposes, $73,200 was recorded on the installment-sales method. 6. Fines incurred for pollution violations were $4,500. 7. Pretax financial income was $713,600. The tax rate is 30%. 4. Your answer is correct. Prepare a schedule starting with pretax financial income in 2020 and ending with taxable income in 2020. Schedule of Pretax Financial Income and Taxable income for 2020 Pretax financial income 713600 Permanent differences Bond Interest Revenue .4300 ESCO Insurance Expense 9900 Pollution Fines 4500 723700 Temporary differences Depreciation Expense -28800 Installment Sales - 36800 41800 Warranty Expense Taxable income 699900 SHOW ANSWER SHOW LIST OF ACCOUNTS SHOW SOLUTION LINK TO TEXT LINK TO TEXT LINK TO TEXT

This is the whole entire problem. Can someone help me out on it, please? Thank you.

Answer 1

Solution

Journal Entry

Date	Particulars	Debit Amount	Credit Amount
2021	Income Tax Expense ($723,700x30%)	$217,110
	Deferred Tax Asset ($41,800 x30%)	$ 12,540
	To Deferred Tax Liability ($65,600x30%)		$19,680
	To Income Tax Payable ($699,900 x 30%)		$209,970

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