20x2 began with a $ 24,000 balance in the firm's deferred tax liability. This was based...

20x2 began with a $ 24,000 balance in the firm's deferred tax liability. This was based on the 12/31/x1 prepaid insurance balance of $120,000. The tax rate is 20%. The $120,000 prepaid insurance balance coverage for 20x2 and 20x3 equally. In late December 20x2, the firm performed accounting services for a client and billed the client $20,000 for the work. The client is expected to remit payment in February 20x3. Common revenue less expenses for 20x2 netted to $200,000(this amount is the same for both books and tax). Determine 20x2 income tax expense?

Expert Solution

Answer:

In Financial Books of accounts:

Common revenue less expenses for 20x2 = $200,000

Less, Insurance expense for 20x2 = $60,000

Net Income for 20x2= $200,000 - $60,000 = $140,000

Income Tax Expense = $140,000 * 20% = $28,000

For Tax:

Taxable income = $200,000

Income tax payable = $200,000 *20% = $40,000

Journal Entry:

Income Tax Expense for 20x2 = $28,000

ekkarill92 answered 2 years ago

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