The following information is available for the first three years of operations for Fink Company: Year...

 

Transcribed Image Text:

The following information is available for the first three years of operations for Fink Company: Year 2025 2026 2027 Taxable Income $600,000 475,000 500,000 On January 1, 2025, equipment costing $900,000 was purchased. The equipment had a useful life of 5 years and no salvage value. The straight-line method of depreciation is used for book purposes and the tax depreciation taken each year is listed below Tax Depreciation $264,000 Year 2025 2026 360,000 2027 220,000 2028 56,000 2029 0 TOTAL $900,000 On January 1, 2026, $390,000 was collected in advance for rental of a building for a three-year period. The entire $390,000 was reported as taxable income in 2026, but $270,000 of the $390,000 was reported as unearned revenue at December 31, 2026 for book purposes. The enacted tax rates are 20% for all years. Required (a) Prepare a schedule comparing depreciation for financial reporting and tax purposes. (b) Determine the deferred tax (asset) or liability at the end of 2025. (c) Prepare a schedule of future taxable and (deductible) amounts at the end of 2026. (d) Prepare a schedule of the deferred tax (asset) and liability at the end of 2026. (e) Compute the net deferred tax expense (benefit) for 2026. (f) Prepare the journal entry to record income tax expense, deferred income taxes, and income tax payable for 2026. Journal entry description is not required. The following information is available for the first three years of operations for Fink Company: Year 2025 2026 2027 Taxable Income $600,000 475,000 500,000 On January 1, 2025, equipment costing $900,000 was purchased. The equipment had a useful life of 5 years and no salvage value. The straight-line method of depreciation is used for book purposes and the tax depreciation taken each year is listed below Tax Depreciation $264,000 Year 2025 2026 360,000 2027 220,000 2028 56,000 2029 0 TOTAL $900,000 On January 1, 2026, $390,000 was collected in advance for rental of a building for a three-year period. The entire $390,000 was reported as taxable income in 2026, but $270,000 of the $390,000 was reported as unearned revenue at December 31, 2026 for book purposes. The enacted tax rates are 20% for all years. Required (a) Prepare a schedule comparing depreciation for financial reporting and tax purposes. (b) Determine the deferred tax (asset) or liability at the end of 2025. (c) Prepare a schedule of future taxable and (deductible) amounts at the end of 2026. (d) Prepare a schedule of the deferred tax (asset) and liability at the end of 2026. (e) Compute the net deferred tax expense (benefit) for 2026. (f) Prepare the journal entry to record income tax expense, deferred income taxes, and income tax payable for 2026. Journal entry description is not required.