Answer:
Truttman Company
a. Journal Entries:
December 31, 2020:
Debit Income Tax Expense $112,000
Income Tax Payable $63,000
Deferred tax liability $49,000
To record income tax expense for the year.
December 31, 2021:
Debit Income Tax Expense $70,000
Income Tax Payable $112,000
Deferred tax liability $25,000
To record income tax expense for the year.
December 31, 2022:
Debit Income Tax Expense $76,000
Income Tax Payable $52,000
Deferred tax liability $24,000
To record income tax expense for the year.
December 31, 2023:
Debit Income Tax Expense $90,000
Deferred tax asset $22,000
Income Tax Payable $112,000
To record income tax expense for the year.
b. Income Statement for 2021
Year 2021
Pretax Financial Income $320,000
Income tax expense 70,000
Net income $250,000
Explanation:
a) Data and Calculations:
Year Pretax Financial Income Taxable Income Tax Rate
2020 $290,000 $180,000 35%
2021 320,000 225,000 20
2022 350,000 260,000 20
2023 420,000 560,000 20
Year 2020 2021 2022 2023
Pretax Financial Income $290,000 $320,000 $350,000 $420,000
add Nondeductible expense 30,000 30,000 30,000 30,000
Adjusted Pretax Financial $320,000 $350,000 $380,000 $450,000
Taxable Income 180,000 225,000 260,000 560,000
Depreciation temporary
differences $140,000 $125,000 $120,000 ($110,000)
Tax Rate 35% 20% 20% 20%
Income Tax Payable $63,000 $45,000 $52,000 $112,000
Deferred tax liability (asset) 49,000 25,000 24,000 (22,000)
Income tax expense $112,000 $70,000 $76,000 $90,000
