Yellow Corporation has the following preliminary trial balance, before recording the tax provision. 2019 2020 Cash $
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Question:
Yellow Corporation has the following preliminary trial balance, before recording the tax provision.
2019 | 2020 | |||
Cash | $ | 170,300 | $ | 185,750 |
Accounts Receivable | 153,000 | 540,000 | ||
Allowance for bad debts | (12,000) | (17,500) | ||
Fixed Assets | 850,000 | 950,000 | ||
Accumulated Depreciation | (200,000) | (350,000) | ||
Deferred Tax Asset | ||||
Accounts Payable | (654,100) | (434,550) | ||
Accrued Vacation | (30,000) | (10,500) | ||
Incentive Bonus Payable | (80,000) | (80,000) | ||
Accrued Payroll | (25,000) | (34,000) | ||
Income Taxes Payable | (2,000) | (20,000) | ||
Deferred Tax Liability | (35,285) | (35,285) | ||
APIC | (60,000) | (87,000) | ||
Common Stock | (10,000) | (10,000) | ||
Retained Earnings | (64,915) | (64,915) | ||
Revenue | (3,360,700) | |||
Payroll Expense | 450,000 | |||
Purchases | 110,000 | |||
Insurance | 350,000 | |||
Officers Life insurance | 2,700 | |||
Payroll Taxes | 450,000 | |||
Bad Debt Expense | 9,500 | |||
Travel | 50,000 | |||
Meals and Entertainment | 60,000 | |||
Rent | 650,000 | |||
Office Supplies | 600 | |||
Depreciation | 150,000 | |||
Marketing Costs | 125,000 | |||
Other Expenses | 350,000 | |||
Penalties | 8,000 | |||
Interest Income | (3,100) | |||
Interest Expense | 48,000 | |||
Income tax Expense | 18,000 |
Other facts for Yellow Corporation:
- The federal statutory income tax rate is 21% for both years.
- Yellow Corporation operates in multiple states. The weighted average statutory state income tax rate is 7% for both years.
- Book income including preliminary income tax expense of $18,000 is $532,000.
- Tax depreciation for the year ended 2020 is $500,000.
- Yellow Corporation's cost basis in fixed assets for book and tax is the same.
- Yellow Corporation's pre-tax temporary difference in fixed assets at year-end 2019 was $175,000 book>tax basis.
- None of Yellow Corporation's 2019 vacation accrual was paid within the first 2.5 months of 2020, and none of the 2020 vacation accrual is expected to be paid in the first 2.5 months of 2021.
- All of Yellow Corporation's 2019 bonuses and payroll were paid out within the first 2.5 months of 2020, and Yellow Corporation's expectation is to pay this again in 2021.
- Yellow Corporation is the beneficiary of the officers' life insurance contract(s).
- Interest income is from other than municipal bonds, so is taxable.
REQUIREMENTS: Using the trial balance and the above information, complete the following. (NOTE: Show your work and calculation process for each of the question)
- Compute 2020 federal taxable income.
- Compute the state statutory income tax rate net of the federal benefit.
(State statutory rate net of federal benefit to four decimal places, e.g. .2111)
- Calculate the total 2020 current income tax provision.
(Total current income tax expense is ________)
- Complete the inventory of deferreds using the template below.
Inventory of Deferreds | |||||
Pre-tax 2019 | Current Activity | Pre-tax 2020 | Tax-effected 2020 | ||
Insert temp differences here | |||||
Total pre-tax | |||||
Tax Rate | |||||
Total tax-effected |
Tax-effected DTL balance at 12/31/20 is _________
- Compute the total 2020 deferred income tax provision. (Deferred income tax expense)
- Compute the 2020 effective tax rate
(Effective tax rate to four decimal places, e.g. .2111)
- Complete the 2020 effective tax rate reconciliation using the template below
Effective Tax Rate Reconciliation | |||
Yellow | |||
Pre-tax | Tax-effected | ||
Pretax book income | |||
State income tax expense | |||
Permanent differences | |||
Tax expense |
Total income tax expense is _________
Posted Date: