For the year ended Dec 31, 2020, King Inc. reported pretax accounting income of $800,000. Select...

For the year ended Dec 31, 2020, King Inc. reported pretax accounting income of $800,000.

Select information is listed below:

1) In 2019, the company purchased a piece of equipment with a cost of $500,000. For financial reporting purposes, the company used the straight-line method over a 5-year service life with no residual value expected. For tax purposes, the equipment was scheduled to be depreciated by $160,000, $140,000, $120,000, $50,000 and $30,000 in years 2019 through 2023, respectively.

2) During 2020 loss contingency accrued for financial reporting purpose was $45,000. The loss contingency was due to the pending patent lawsuit brought by its long-time competitor, Queen Inc. The payment for the lawsuit is expected to be paid in 2022.

3) In 2020, the company earned $10,000 interest income from municipal bonds. The interest earned on municipal bonds are exempted for tax purposes. King Inc.’s income tax rate is 30%. At January 1, 2020, the deferred tax asset balance was $0 and the deferred tax liability was $12,000.

Required:

What is taxable income for 2020?

What is the ending balance of DTA on 12/31/2020?

What is the ending balance of DTL on 12/31/2020?

Prepare journal entry to record income taxes for year 2020.

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Expert Solution

ekkarill92 answered 1 year ago

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