Question

In: Accounting

Blossom Inc. began business on January 1, 2021. Its pretax financial income for the first 2...

Blossom Inc. began business on January 1, 2021. Its pretax financial income for the first 2 years was as follows:

2021 $250,000
2022 570,000


The following items caused the only differences between pretax financial income and taxable income.

1. In 2021, the company collected $363,000 of rent; of this amount, $121,000 was earned in 2021; the other $242,000 will be earned equally over the 2022–2023 period. The full $363,000 was included in taxable income in 2021.
2. The company pays $10,100 a year for life insurance on officers.
3. In 2022, the company terminated a top executive and agreed to $93,000 of severance pay. The amount will be paid $31,000 per year for 2022-2024. The 2022 payment was made. The $93,000 was expensed in 2022. For tax purposes, the severance pay is deductible as it is paid.


The enacted tax rates existing at December 31, 2021 are:

2021 20% 2023 30%
2022 25% 2024 30%

QUESTIONS TO BE ANSWERED:

Determine taxable income for 2021 and 2022.

2021 2022
Taxable income $ $

Determine the deferred income taxes at the end of 2021. (Enter negative amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Deferred income taxes $


Prepare the journal entry to record income taxes for 2021.

Prepare a schedule of future taxable and (deductible) amounts at the end of 2022. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

2023 2024 Total
Future taxable (deductible) amounts:
Rent $ $ $
Severance pay

Prepare a schedule of the deferred tax (asset) and liability at the end of 2022. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Deferred Tax

Temporary Difference

Future Taxable
(Deductible) Amounts

Tax Rate

(Asset)

Liability

Rent $

%

$ $
Severance pay

%

     Totals $ $ $

Compute the net deferred tax expense (benefit) for 2022. (Enter negative amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Net deferred tax expense (benefit) for 2022

Solutions

Expert Solution


Related Solutions

Blossom Inc. began business on January 1, 2021. Its pretax financial income for the first 2...
Blossom Inc. began business on January 1, 2021. Its pretax financial income for the first 2 years was as follows: 2021 $360,000 2022 680,000 The following items caused the only differences between pretax financial income and taxable income. 1. In 2021, the company collected $396,000 of rent; of this amount, $132,000 was earned in 2021; the other $264,000 will be earned equally over the 2022–2023 period. The full $396,000 was included in taxable income in 2021. 2. The company pays...
Pharoah Inc. began business on January 1, 2021. Its pretax financial income for the first 2...
Pharoah Inc. began business on January 1, 2021. Its pretax financial income for the first 2 years was as follows: 2021 $300,000 2022 620,000 The following items caused the only differences between pretax financial income and taxable income. 1. In 2021, the company collected $378,000 of rent; of this amount, $126,000 was earned in 2021; the other $252,000 will be earned equally over the 2022–2023 period. The full $378,000 was included in taxable income in 2021. 2. The company pays...
12. Farmer Inc. began business on January 1, 2021. Its pretax financial income for the first...
12. Farmer Inc. began business on January 1, 2021. Its pretax financial income for the first 2 years was as follows: 2021 $240,000 2022 560,000 The following items caused the only differences between pretax financial income and taxable income. 1. In 2021, the company collected $420,000 of rent; of this amount, $140,000 was earned in 2021; the other $280,000 will be earned equally over the 2022–2023 period. The full $420,000 was included in taxable income in 2021. 2. The company...
12. Farmer Inc. began business on January 1, 2021. Its pretax financial income for the first...
12. Farmer Inc. began business on January 1, 2021. Its pretax financial income for the first 2 years was as follows: 2021 $240,000 2022 560,000 The following items caused the only differences between pretax financial income and taxable income. 1. In 2021, the company collected $420,000 of rent; of this amount, $140,000 was earned in 2021; the other $280,000 will be earned equally over the 2022–2023 period. The full $420,000 was included in taxable income in 2021. 2. The company...
Farmer Inc. began business on January 1, 2019. Its pretax financial income for the first 2...
Farmer Inc. began business on January 1, 2019. Its pretax financial income for the first 2 years was as follows:                               2019                                  $340,000                               2020                                    760,000 The following items caused the only differences between pretax financial income and taxable income. 1.    In 2019, the company collected $420,000 of rent; of this amount, $140,000 was earned in 2019; the other $280,000 will be earned equally over the 2020–2021 periods. The full $420,000 was included in taxable income in 2019. 2.    The...
1. Charlotte, Inc. began business on January 1, 2017. Its pretax financial income for the first...
1. Charlotte, Inc. began business on January 1, 2017. Its pretax financial income for the first two year was as follows: 2017 $150,000 2018 100,000 The following Items cased the only differences between pretax financial income and taxable income. i. In 2017, the company collected $105,000 of rent; of this amount, $35,000 was earned in 2017; the other $70,000 will be earned equally over the 2018-19 period. The full $105,000 was included in the taxable income in 2017. ii. In...
Farmer Inc. began business on January 1, 2019. Its pretax financial income for the first 2 years was as follows:
Farmer Inc. began business on January 1, 2019. Its pretax financial income for the first 2 years was as follows:                              2019                                  $340,000                              2020                                    760,000The following items caused the only differences between pretax financial income and taxable income.1.    In 2019, the company collected $420,000 of rent; of this amount, $140,000 was earned in 2019; the other $280,000 will be earned equally over the 2020–2021 periods. The full $420,000 was included in taxable income in 2019.2.    The company pays $20,000 a year...
Zenon Corp. began business on January 1, 2013. Its pretax financial income for the first 2 years was as follows
Zenon Corp. began business on January 1, 2013. Its pretax financial income for the first 2 years was as follows2013 2014$240,000    $560,000The following items caused the only differences between pretax financial income and taxable income.In 2013, the company collected $180,000 of rent; of this amount, $60,000 was earned in 2013; the other $120,000 will be earned equally over the 2014–2015 period. The full $180,000 was included in taxable income in 2013.2. The company pays a $10,000 fine for pollution.3....
On January 2, 2021, Green Inc had pretax accounting income of $6,800,000 and taxable income of...
On January 2, 2021, Green Inc had pretax accounting income of $6,800,000 and taxable income of $9,680,000 for the year ended December 31, 2021. The 2021 tax rate was 25%. The only difference between book and taxable income is estimated warranty costs. Expected payments and scheduled enacted tax rates are as follows: 2022 $ 960,000 30 % 2023 480,000 30 % 2024 480,000 30 % 2025 960,000 35 %    Required: Prepare one compound journal entry to record Green's provision...
A reconciliation of Sunland Company's pretax accounting income with its taxable income for 2021, its first...
A reconciliation of Sunland Company's pretax accounting income with its taxable income for 2021, its first year of operations, is as follows: Pretax accounting income $3900000 Excess tax depreciation (189000) Taxable income $3711000 The excess tax depreciation will result in equal net taxable amounts in each of the next three years. Enacted tax rates are 30% in 2021, 25% in 2022 and 2023, and 20% in 2024. The total deferred tax liability to be reported on Sunland's balance sheet at...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT