Question

The following facts relate to Crane Corporation.

1.		Deferred tax liability, January 1, 2020, $25,000.
2.		Deferred tax asset, January 1, 2020, $0.
3.		Taxable income for 2020, $118,750.
4.		Pretax financial income for 2020, $250,000.
5.		Cumulative temporary difference at December 31, 2020, giving rise to future taxable amounts, $300,000.
6.		Cumulative temporary difference at December 31, 2020, giving rise to future deductible amounts, $43,750.
7.		Tax rate for all years, 20%.
8.		The company is expected to operate profitably in the future.

Compute income taxes payable for 2020.

Income taxes payable

$enter Income taxes payable in dollars

eTextbook and Media

List of Accounts

  

  

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount

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List of Accounts

  

  

Prepare the income tax expense section of the income statement for 2020, beginning with the line “Income before income taxes.” (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Crane Corporation Income Statement (Partial) choose the accounting period                                                                      December 31, 2020For the Year Ended December 31, 2020For the Quarter Ended December 31, 2020
select an income statement item                                                                      CurrentDeferredDividendsExpensesIncome before Income TaxesIncome Tax ExpenseNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues		$enter a dollar amount
select an opening section name                                                                      CurrentDeferredDividendsExpensesIncome before Income TaxesIncome Tax ExpenseNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
select an income statement item                                                                      CurrentDeferredDividendsExpensesIncome before Income TaxesIncome Tax ExpenseNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues	$enter a dollar amount
select an income statement item                                                                      CurrentDeferredDividendsExpensesIncome before Income TaxesIncome Tax ExpenseNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues	enter a dollar amount
		enter a subtotal of the two previous amounts
select a closing name for this statement                                                                      CurrentDeferredDividendsExpensesIncome before Income TaxesIncome Tax ExpenseNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues		$enter a total net income or loss amount

Answer 1

Temporary difference arising during 2020 giving rise to future taxable amounts	175000	=300000-(25000/20%)
1
Taxable income	118750
X Tax rate	20%
Income taxes payable	23750
2
Account Titles and Explanation	Debit	Credit
Income tax expense	50000
Deferred tax asset	8750		=43750*20%
Deferred tax liability		35000	=175000*20%
Income taxes payable		23750
3
Income Statement (Partial)
For the year ended December 31, 2020
Income before income taxes		250000
Income tax expense
Current	23750
Deferred	26250
		50000
Net income/(loss)		200000