Question

The following facts relate to Bridgeport Corporation. 1. 2. 3. 4. Deferred tax liability, January 1, 2020, $22,800. Deferred tax asset, January 1, 2020, $0. Taxable income for 2020, $108,300. Pretax financial income for 2020, $228,000. Cumulative temporary difference at December 31, 2020, giving rise to future taxable amounts, $273,600. Cumulative temporary difference at December 31, 2020, giving rise to future deductible amounts, $39,900. Tax rate for all years, 20%. The company is expected to operate profitably in the future. 5. 6. 7. 8. (a) Your answer is correct. Compute income taxes payable for 2020. Income taxes payable 21,660 e Textbook and Media List of Accounts Attempts: 1 of 5 used (b) 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 Ofor the amounts.) Account Titles and Explanation Debit Credit Income Tax Expense Current Tax Deferred Tax Asset Net Income

Answer 1

Journal Entry
Date	Particulars	Debit	Credit
31-Dec-20	Income tax expense Dr	$45,600.00
	Deferred tax assets Dr	$7,980.00
	To Income tax Payable ($108,300*20%)		$21,660.00
	To Deferred tax liability		$31,920.00
	(To record income tax and deferred tax for 2020)
		$53,580.00	$53,580.00
	Income taxes payable for 2020 = Taxable income * Tax rate = $108,300*20% = $21,660
	Workings
	Computation of Required balance and recognition of Deferred tax liability and Deferred tax Assets
	Particulars	Amount
	Cumulative temporary differences giving rise to future taxable amount	$273,600.00
	Required ending balance in deferred tax liability ($273,600*20%)	$54,720.00
	Existing balance of deferred tax liability	$22,800.00
	Deferred tax liability to be recorded for current year(54720-22800)	$31,920.00
	Temporary differences for current year giving rise to future taxable amount ($31920/20%)	$159,600.00
	Cumulative temporary differences giving rise to future deductible amount	$39,900.00
	Required ending balance in deferred tax Assets (39,900*20%)	$7,980.00
	Existing balance of deferred tax Assets	$0.00
	Deferred tax assets to be recorded for current year	$7,980.00
	Temporary differences for current year giving rise to future deductible amount ($7980/20%)	$39,900.00