The accounting records of Clayton Incorporated show the following data for 2019: 1. Life insurance expense...

 

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The accounting records of Clayton Incorporated show the following data for 2019: 1. Life insurance expense on officers was $60,000. 2. Clayton's CEO died after contracting COVID-19 on a vacation cruise. Clayton received $900,000 proceeds from a life insurance policy carried on the CEO. 3. Clayton uses the straight-line method to calculate depreciation for financial statements and an accelerated method to calculate depreciation for taxes. Straight-line depreciation is $220,000. Accelerated depreciation is $300,000. 4. Interest revenue on State of Florida bonds totaled $30,000. 5. Expenses incurred in obtaining State of Florida bond income were $3,000. 6. Product warranties were estimated to be $150,000 in 2020. Actual repair and labor costs related to the warranties in 2020 were $40.000. The remainder is estimated to be paid evenly over the next two years. 7. Fines incurred for pollution violations were $50,000. 8. Rent collected in advance on January 1, 2020, totaled $160,000 for a 4-year period. Of this amount, $120,000 was reported as uneamed at December 31, 2020, for book purposes. 9. Pretax financial income was $2,000,000. The enacted tax rate is 22% for 2020 and 20% for all future years. Instructions: a. Compute taxable income and income taxes payable for 2020. b. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020. The accounting records of Clayton Incorporated show the following data for 2019: 1. Life insurance expense on officers was $60,000. 2. Clayton's CEO died after contracting COVID-19 on a vacation cruise. Clayton received $900,000 proceeds from a life insurance policy carried on the CEO. 3. Clayton uses the straight-line method to calculate depreciation for financial statements and an accelerated method to calculate depreciation for taxes. Straight-line depreciation is $220,000. Accelerated depreciation is $300,000. 4. Interest revenue on State of Florida bonds totaled $30,000. 5. Expenses incurred in obtaining State of Florida bond income were $3,000. 6. Product warranties were estimated to be $150,000 in 2020. Actual repair and labor costs related to the warranties in 2020 were $40.000. The remainder is estimated to be paid evenly over the next two years. 7. Fines incurred for pollution violations were $50,000. 8. Rent collected in advance on January 1, 2020, totaled $160,000 for a 4-year period. Of this amount, $120,000 was reported as uneamed at December 31, 2020, for book purposes. 9. Pretax financial income was $2,000,000. The enacted tax rate is 22% for 2020 and 20% for all future years. Instructions: a. Compute taxable income and income taxes payable for 2020. b. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020.

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Computation of taxable income Pretax financial income a 2000000 Permanent differences Add Life insur... View the full answer