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2. Munoz Corp.'s books showed pretax financial income of $3,600,000 for the year ended December 31,...

2. Munoz Corp.'s books showed pretax financial income of $3,600,000 for the year ended December 31, 2021. In the computation of federal income taxes, the following data were considered: Gain on an involuntary conversion $1,560,000 (Munoz has elected to replace the property within the statutory period using total proceeds.) Depreciation deducted for tax purposes in excess of depreciation deducted for book purposes 240,000 Federal estimated tax payments, 2021 200,000 Enacted federal tax rate, 2021 20%

Prepare the accounting entry for taxes on Munoz Corp’s Books for 2021.

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Answer #1

Solution:

Accounting entry for taxes on Munoz Corp’s Books for 2021.

Date Particulars Debit $ Credit $
Income tax expense $560,000
Deferred tax liability $360,000
Income tax payable $200,000
Particulars $
Temporary differences
Gain on involuntary conversion not taxable in current year $       1,560,000
Depreciation excess charged $          240,000
Total Deferred liability $       1,800,000
Future enacted tax rate 20%
Deferred tax liability $          360,000
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