Question

The following information is available for Whispering Corporation for 2020. 1. Depreciation reported on the tax return exceeded depreciation reported on the income statement by $124,000. This difference will reverse in equal amounts of $31,000 over the years 2021–2024. 2. Interest received on municipal bonds was $9,600. 3. Rent collected in advance on January 1, 2020, totaled $59,700 for a 3-year period. Of this amount, $39,800 was reported as unearned at December 31, 2020, for book purposes. 4. The tax rates are 40% for 2020 and 35% for 2021 and subsequent years. 5. Income taxes of $333,000 are due per the tax return for 2020. 6. No deferred taxes existed at the beginning of 2020.

Compute taxable income for 2020. Taxable income for 2020 $enter Taxable income for 2020 in dollars SHOW LIST OF ACCOUNTS

Compute pretax financial income for 2020. Pretax financial income for 2020 $enter Pretax financial income for 2020 in dollars SHOW LIST OF ACCOUNTS

Prepare the journal entries to record income tax expense, deferred income taxes, and income taxes payable for 2020 and 2021. Assume taxable income was $1,063,000 in 2021. (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.) Date Account Titles and Explanation Debit Credit 2020 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 2021 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 SHOW LIST OF ACCOUNTS

Prepare the income tax expense section of the income statement for 2020, beginning with “Income before income taxes.” (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Whispering Corporation Income Statement (Partial) choose the accounting period December 31, 2020For the Year Ended December 31, 2020For the Quarter Ended December 31, 2020 select an income statement item CurrentDeferredDividendsExpensesIncome before Income TaxesIncome Tax ExpenseNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues $enter a dollar amount select an opening section name CurrentDeferredDividendsExpensesIncome before Income TaxesIncome Tax ExpenseNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues select an income statement item     Current    Deferred    Dividends    Expenses    Income before Income Taxes    Income Tax Expense    Net Income / (Loss)    Retained Earnings, January 1    Retained Earnings, December 31    Revenues    Total Expenses    Total Revenues     $enter a dollar amount select an income statement item     Current    Deferred    Dividends    Expenses    Income before Income Taxes    Income Tax Expense    Net Income / (Loss)    Retained Earnings, January 1    Retained Earnings, December 31    Revenues    Total Expenses    Total Revenues     enter a dollar amount enter a subtotal of the two previous amounts select a closing name for this statement CurrentDeferredDividendsExpensesIncome before Income TaxesIncome Tax ExpenseNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues $enter a total net income or loss amount Click if you would like to Show Work for this question: Open Show Work

Answer 1

a)Taxable income for 2020 = 333,000 / 0.40 = 832,500

b)
Pretax financial income for 2020 = Taxable income + excess depreciation + municipal interest - unearned rent

Pretax financial income for 2020=832500 + 124000+ 9600 - 39800= $926,300

c.

Journal Entries -
Date	Particulars	Debit	Credit
31-Dec-20	Income tax expense	$362470
	Deferred tax assets ($39800*35%)	$13930
	Income tax Payable		$333,000
	Deferred tax liability ($124,000*35%)		$43400
	(To record income tax and deferred tax for 2017)
31-Dec-21	Income tax expense	$368165
	Deferred tax liability (124000/4 *35%)	$10850
	Income tax Payable ($1,063,000*35%)		$372050
	Deferred tax Assets (39800/2 *35%)		$6965
	(To record income tax and deferred tax for 2018)

d

Income Statement (Partial)
For year ended December 31, 2020
Particulars		Amount
Income before taxes		$926300
Income tax expense:
Current Tax	$333000
Deferred	$29470
		$362470
Net Income		$563830