You must show your computations and label your work to receive full credit.

• It can be typed or hand-written (make sure it is legible).

• Everyone in the group is expected to contribute.

Big Company began business on January 1, 2021. Its pretax financial income for the first 2 years was as follows: 2021 $320,000 2022 380,000 The following items caused the only differences between pretax financial income and taxable income.

• In 2021, excess of tax depreciation over book depreciation is $90,000. This $90,000 difference will reverse equally over the years 2022 – 2024.

• In 2022, the company collected $240,000 of rent; of this amount, $80,000 was earned in 2022; the other $160,000 will be earned equally over the 2023–2024 period. The full $240,000 was included in taxable income in 2022.

• The company pays $5,000 every year for life insurance on officers which is not deductible.

The enacted tax rates existing are: 2021 20% 2023 30% 2022 20% 2024 30%

(a) Calculate taxable income for 2021 and 2022.

(b) Prepare a schedule showing future taxable and deductible amounts and the resulting deferred tax asset and liability.

(c) Determine the deferred income taxes at the end of 2021. Use a T-account

(d) Prepare the journal entry to record income taxes for 2021.

(e) Determine the deferred income taxes at the end of 2022. Use a T-account

(f) Prepare the journal entry to record income taxes for 2022.

You must show all supporting computations.

Make sure all computations are labeled.

Hint: T- accounts can be helpful 30 points possible

Answer rating: 100% (QA)

Sol a Sol b Profit before Tax Excess Accounting depreciation Tax depreciation Rent receive... View the full answer