Recording Multiple Temporary Differences, Multiple Tax Rates

Aim Inc. had the following activity for the years 2020-2022.

• Prepaid maintenance contract: $60,000 on January 1, 2020, for a three-year period beginning January 1, 2020.
• Deferred revenue: $90,000 on January 1, 2020, for a three-year period beginning January 1, 2020.
• Pretax GAAP income is $1,000,000, $776,000, and $850,000 for the years 2020, 2021, and 2022, respectively.
• Enacted tax rates are 25% for years 2020 and 2021, and 30% for the year 2022.
• There were no balances in the deferred tax accounts on January 1, 2020.

Required

a. Compute the increase to income tax payable on December 31, 2020, 2021, and 2022.

	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2022
Income tax payable increase	Answer	Answer	Answer

b. Prepare schedules to compute deferred tax accounts on December 31, 2020.

• Note: Do not use negative signs with your answers.

Prepaid Expense	2021	2022	Total
Reversal of difference between GAAP and tax bases	Answer	Answer	Answer
Tax rate	Answer	Answer
AnswerDeferred tax assetDeferred tax liability	Answer	Answer	Answer

Deferred Revenue	2021	2022	Total
Reversal of difference between GAAP and tax bases	Answer	Answer	Answer
Tax rate	Answer	Answer
AnswerDeferred tax assetDeferred tax liability	Answer	Answer	Answer

c. Prepare the journal entry to record income taxes in the following years: 2020, 2021, and 2022.

• Note: List multiple debits (when applicable) in alphabetical order and list multiple credits (when applicable) in alphabetical order.
• Note: If the journal entry includes an extra line that is not required, select "N/A" as the account name and leave the Dr. and Cr. answers blank (zero) in the very last row of the journal entry.

Date	Account Name	Dr.	Cr.
Dec. 31, 2020	AnswerDeferred Tax AssetValuation Allowance for Deferred Tax AssetIncome Tax PayableLiability for Unrecognized Tax BenefitsDeferred Tax LiabilityIncome Tax ExpenseN/A	Answer	Answer
	AnswerDeferred Tax AssetValuation Allowance for Deferred Tax AssetIncome Tax PayableLiability for Unrecognized Tax BenefitsDeferred Tax LiabilityIncome Tax ExpenseN/A	Answer	Answer
	AnswerDeferred Tax AssetValuation Allowance for Deferred Tax AssetIncome Tax PayableLiability for Unrecognized Tax BenefitsDeferred Tax LiabilityIncome Tax ExpenseN/A	Answer	Answer
	AnswerDeferred Tax AssetValuation Allowance for Deferred Tax AssetIncome Tax PayableLiability for Unrecognized Tax BenefitsDeferred Tax LiabilityIncome Tax ExpenseN/A	Answer	Answer

Dec. 31, 2021	AnswerDeferred Tax AssetValuation Allowance for Deferred Tax AssetIncome Tax PayableLiability for Unrecognized Tax BenefitsDeferred Tax LiabilityIncome Tax ExpenseN/A	Answer	Answer
	AnswerDeferred Tax AssetValuation Allowance for Deferred Tax AssetIncome Tax PayableLiability for Unrecognized Tax BenefitsDeferred Tax LiabilityIncome Tax ExpenseN/A	Answer	Answer
	AnswerDeferred Tax AssetValuation Allowance for Deferred Tax AssetIncome Tax PayableLiability for Unrecognized Tax BenefitsDeferred Tax LiabilityIncome Tax ExpenseN/A	Answer	Answer
	AnswerDeferred Tax AssetValuation Allowance for Deferred Tax AssetIncome Tax PayableLiability for Unrecognized Tax BenefitsDeferred Tax LiabilityIncome Tax ExpenseN/A	Answer	Answer

Dec. 31, 2022	AnswerDeferred Tax AssetValuation Allowance for Deferred Tax AssetIncome Tax PayableLiability for Unrecognized Tax BenefitsDeferred Tax LiabilityIncome Tax ExpenseN/A	Answer	Answer
	AnswerDeferred Tax AssetValuation Allowance for Deferred Tax AssetIncome Tax PayableLiability for Unrecognized Tax BenefitsDeferred Tax LiabilityIncome Tax ExpenseN/A	Answer	Answer
	AnswerDeferred Tax AssetValuation Allowance for Deferred Tax AssetIncome Tax PayableLiability for Unrecognized Tax BenefitsDeferred Tax LiabilityIncome Tax ExpenseN/A	Answer	Answer
	AnswerDeferred Tax AssetValuation Allowance for Deferred Tax AssetIncome Tax PayableLiability for Unrecognized Tax BenefitsDeferred Tax LiabilityIncome Tax ExpenseN/A	Answer	Answer

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