Canders Inc. began business in 2021. In preparing Canders financial statements and income tax return for 2021,
Question:
Canders Inc. began business in 2021. In preparing Canders financial statements and income tax return for 2021, you discovered the following:
• Canders Inc. leased part of its office building to Sanders Inc. on September 1 for an advance payment of $198,000. The lease covers 18 months, and the advance payment is for 12 months.
• Canders earned $25,000 of interest from its investment in Washington State bonds.
• Canders paid Prudential Life Insurance Inc. the yearly premium of $30,000 in early January for a key-man life insurance policy.
• Canders acquired capital assets for $324,000.
For financial reporting, the assets have a 6-year useful life and $0 salvage. For income taxes, the capital assets are 5-year property and cost will be recovered using the mid-year convention.
Year Depreciation expense Accounting Tax
2021 $54,000 $ 65,000
2022 54,000 104,000
2023 54,000 62,000
2024 54,000 37,000
2025 54,000 37,000
2026 54,000 19,000
• Sanders sold some real estate in 2021 for a gain of $150,000. For federal income taxes, the gain will be reported using the installment method.
Gain reported on the income statement Gain reported on tax the tax return
2021 $150,000 $38,000
2022 40,000
2023 40,000
2024 32,000
Additional information for 2021:
• Income before income tax reported on the income statement $825,000
• Taxable income reported on line 28 of Form 1120 839,000
• Tax rate 21%
• Estimated income tax paid each quarter 43,000
(A) For the year ended December 31, 2021, what is Canders statutory income tax liability?
(B) At December 31, 2021, what is Canders statutory tax obligation?
(C) At December 31, 2021, what are the total future taxable amounts?
(D) At December 31, 2021, what are the total future deductible amounts?
(E) What is the amount the deferred tax asset increased?
(F) What is the amount the deferred tax liability increased?
(G) What is Canders’ net income for 2021?
South Western Federal Taxation 2015
ISBN: 9781305310810
38th edition
Authors: William H. Hoffman, William A. Raabe, David M. Maloney, James C. Young