Recording and Reporting Temporary Difference Staples Corporation would have had identical income before taxes on both...

   

Transcribed Image Text:

Recording and Reporting Temporary Difference Staples Corporation would have had identical income before taxes on both its income tax returns and its income statements for the years 2020 through 2023 except for a depreciable asset that cost $192,000. The asset was depreciated for income tax purposes using the following amounts: 2020, $76,800; 2021, $57,600; 2022, $38,400; and 2023, $19,200. However for accounting purposes the straight-line method was used (that is, $48,000 per year). The accounting and tax periods both end December 31. There were no deferred taxes at the beginning of 2020. The depreciable asset has a four-year estimated life and no residual value. The tax rate for each year was 25%. Pretax GAAP income amounts for each of the four years were as follows. Year Pretax GAAP Income 2020 2021 2022 2023 $368,000 400,000 384,000 384,000 Schedule for Income Tax Payable and Deferred Taxes Taxable income Tax rate Income tax payable increase $1 a. Prepare a schedule to compute the increase to income tax payable on December 31, 2020, 2021, 2022, and 2023. Dec. 31, 2020 Dec. 31, 2021 Dec. 31, 2022 Dec. 31, 2023 $ $ $ $ 25% GAAP basis of depreciable asset Tax basis uf depreciable asset Difference between GAAP and tax bases Tax rate $ $ → $ 25% 25% $ $ b. Prepare a schedule to determine the deferred tax balances on December 31, 2020, 2021, 2022, and 2023. Assume a zero-beginning balance in the deferred tax liability account on January 1, 2020. Note: Do not use negative signs with your answers. 2020 $ Journal Entries 2021 25% 25% $ S $ 2022 25% $ 25% $ Financial Statement Presentation. 2023 25% Recording and Reporting Temporary Difference Staples Corporation would have had identical income before taxes on both its income tax returns and its income statements for the years 2020 through 2023 except for a depreciable asset that cost $192,000. The asset was depreciated for income tax purposes using the following amounts: 2020, $76,800; 2021, $57,600; 2022, $38,400; and 2023, $19,200. However for accounting purposes the straight-line method was used (that is, $48,000 per year). The accounting and tax periods both end December 31. There were no deferred taxes at the beginning of 2020. The depreciable asset has a four-year estimated life and no residual value. The tax rate for each year was 25%. Pretax GAAP income amounts for each of the four years were as follows. Year Pretax GAAP Income 2020 2021 2022 2023 $368,000 400,000 384,000 384,000 Schedule for Income Tax Payable and Deferred Taxes Taxable income Tax rate Income tax payable increase $1 a. Prepare a schedule to compute the increase to income tax payable on December 31, 2020, 2021, 2022, and 2023. Dec. 31, 2020 Dec. 31, 2021 Dec. 31, 2022 Dec. 31, 2023 $ $ $ $ 25% GAAP basis of depreciable asset Tax basis uf depreciable asset Difference between GAAP and tax bases Tax rate $ $ → $ 25% 25% $ $ b. Prepare a schedule to determine the deferred tax balances on December 31, 2020, 2021, 2022, and 2023. Assume a zero-beginning balance in the deferred tax liability account on January 1, 2020. Note: Do not use negative signs with your answers. 2020 $ Journal Entries 2021 25% 25% $ S $ 2022 25% $ 25% $ Financial Statement Presentation. 2023 25%

Answer rating: 100% (QA)

a Prepare a schedule to compute the increase to income tax ... View the full answer