Zekany Corporation would have had identical income before taxes on both its inco
ID: 2572793 • Letter: Z
Question
Zekany Corporation would have had identical income before taxes on both its income tax returns and income statements for the years 2018 through 2021 except for differences in depreciation on an operational asset. The asset cost $140,000 and is depreciated for income tax purposes in the following amounts: (PLEASE SEE ATTACHED FOR REMAINDER OF QUESTION)
Zekany Corporation would have had kdentical income before taxes on both its income tax returns and income statements for the years a 2018 through 2021 except for differences in depreciation on an operational asset. The asset cost $140,000 and is depreciated for Income tax purposes in the following amounts. 2018 $46, 200 2019 61, 600 2020 21,000 2021 11,200 The operational asset has a four-year life and no residual value. The straight-line method is used for financial reporting purposes. Income amounts before depreciation expense and income taxes for each of the four years were as follows. 2018 2019 2020 2021 Accounting income before taxes and depreciation $80,000 $100,000 $90,000 $90,000 Assume the average and marginal income tax rate for 2018 and 2019 was 30%; however, during 2019 tax legislation was passed to raise the tax rate to 40% beginning in 2020. The 40% rate remained in effect through the years 2020 and 2021. Both the accounting and income tax periods end December 31. Required: Prepare the journal entries to record income taxes for the years 2018 through 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)Explanation / Answer
The entry for 2020 can be better explained by splitting into two separate entries as below:
Calculations:
No. Date General Journal Debit Credit 1 Dec. 31, 2018 Income tax expense 13500 Deferred tax liability [($45000 - $33800) x 30%] 3360 Income tax payable ($33800 x 30%) 10140 2 Dec. 31, 2019 Income tax expense 19500 Deferred tax liability [($65000 - $38400) x 30%] 7980 Income tax payable ($38400 x 30%) 11520 3 Dec. 31, 2020 Income tax expense 25780 Deferred tax liability 1820 Income tax payable ($69000 x 40%) 27600 4 Dec. 31, 2021 Income tax expense 22000 Deferred tax liability [($55000 - $78800) x 40%] 9520 Income tax payable ($78800 x 40%) 31520Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.