Question: Assuming the same information from Brief Exercise 18-21, record the income tax journal entry on December 31, 2020. Assume zero beginning balances in deferred tax

Assuming the same information from Brief Exercise 18-21, record the income tax journal entry on December 31, 2020. Assume zero beginning balances in deferred tax accounts.

Exercise 18-21

On December 31, 2020, Lexxus Inc. recorded an unrealized gain in income of $\$ 5,000$ related to its trading debt securities originally purchased on December 15,2020 , for $\$ 20,000$. Lexxus recognized pretax GAAP income of $\$ 80,000$ in 2020 and had a tax rate of $25 \%$.

a. Determine the reported amount of trading securities in the financial statements of Lexxus on December 30, 2020.

b. Determine the tax basis of the trading securities on December 30, 2020.

c. Calculate the deferred tax balance and show how it would be reported in the December 31, 2020, balance sheet of Lexxus.

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