Wittco Company reports pretax GAAP income in 2020, its first year of operations, of $180,000. Temporary differences in the GAAP basis and tax basis of assets arose in 2020 from the following two sources. Prepayment of 2021 rent in the amount of $43,200 in 2020. An installment sale totaling $64,800, with cash collections expected in two equal amounts in 2022 and 2023. The enacted tax rates are 25% in 2020, 30% in 2021, and 40% in 2022 and thereafter. The enacted tax rates are 25% in 2020, 30% in 2021, and 40% in 2022 and thereafter. Required a. Record the income tax journal entry on December 31, 2020. b. Record the income tax journal entry on December 31, 2020, assuming that a new tax law is passed in 2020 decreasing the tax rate to 20% for 2020 and all years thereafter
Wittco Company reports pretax GAAP income in 2020, its first year of operations, of $180,000. Temporary differences in the GAAP basis and tax basis of assets arose in 2020 from the following two sources. Prepayment of 2021 rent in the amount of $43,200 in 2020. An installment sale totaling $64,800, with cash collections expected in two equal amounts in 2022 and 2023. The enacted tax rates are 25% in 2020, 30% in 2021, and 40% in 2022 and thereafter. The enacted tax rates are 25% in 2020, 30% in 2021, and 40% in 2022 and thereafter. Required a. Record the income tax journal entry on December 31, 2020. b. Record the income tax journal entry on December 31, 2020, assuming that a new tax law is passed in 2020 decreasing the tax rate to 20% for 2020 and all years thereafter
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter18: Accounting For Income Taxes
Section: Chapter Questions
Problem 9P: Interperiod Tax Allocation Peterson Company has computed its pretax financial income to be 66,000 in...
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Wittco Company reports pretax GAAP income in 2020, its first year of operations, of $180,000. Temporary differences in the GAAP basis and tax basis of assets arose in 2020 from the following two sources.
Prepayment of 2021 rent in the amount of $43,200 in 2020.
An installment sale totaling $64,800, with cash collections expected in two equal amounts in 2022 and 2023. The enacted tax rates are 25% in 2020, 30% in 2021, and 40% in 2022 and thereafter.
The enacted tax rates are 25% in 2020, 30% in 2021, and 40% in 2022 and thereafter.
Required
a. Record the income tax journal entry on December 31, 2020.
b. Record the income tax journal entry on December 31, 2020, assuming that a new tax law is passed in 2020 decreasing the tax rate to 20% for 2020 and all years thereafter
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