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The following information is available for Blossom Corporation for 2020.1. Depreciation reported on the tax return exceeded depreciation reported on the income statement by $124,000. This difference will reverse in equal amounts of $31,000 over the years 2021–2024.2. Interest received on municipal bonds was $9,300.3. Rent collected in advance on January 1, 2020, totaled $64,200 for a 3-year period. Of this amount, $42,800 was reported as unearned at December 31, 2020, for book purposes.4. The tax rates are 40% for 2020 and 35% for 2021 and subsequent years.5. Income taxes of $297,000 are due per the tax return for 2020.6. No deferred taxes existed at the beginning of 2020.Requried:Prepare the income tax expense section of the income statement for 2020.

Respuesta :

jepessoa

Answer:

first we must determine taxable income = due income taxes / tax rate = $297,000  / 0.4 = $742,500

interest received on municipal bonds $9,300

unearned rent revenue = $42,800

deferred tax asset = $42,800 x 0.4 = $17,120

total pretax financial income = $742,500 + $9,300 + $124,000 - $42,800 = $833,000

deferred tax liability = $124,000 x .4 = $49,600

Income tax expense section

For the year ended December 31, 2020

Total pretax financial income                   $833,000

Income tax expense:

  • Income taxes $297,000
  • Deferred tax liability $49,600
  • Deferred tax asset -$17,120            -$329,480

Net income                                               $503,520

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