The pretax financial income of Truttman Company differs from its taxable income throughout each of 4 years as follows.

Pretax financial income for each year includes a nondeductible expense of $30,000 (never deductible for tax purposes). The remainder of the difference between pretax financial income and taxable income in each period is due to one depreciation temporary difference. No deferred income taxes existed at the beginning of 2020.

Instructions

a. Prepare journal entries to record income taxes in all 4 years. Assume that the change in the tax rate to 20% was not enacted until the beginning of 2021.

b. Prepare the income statement for 2021, beginning with Income before income taxes.

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Taxable Income Pretax Financial Income Tax Rate 35% Year 2020 $290,000 $180,000 225,000 | 2021 20 20 2022 2023 350,000 420,000 260,000 560,000 20