Question

The following facts relate to Blossom Corporation.

1. Deferred tax liability, January 1, 2020, $21,000.

2. Deferred tax asset, January 1, 2020, $0.

3. Taxable income for 2020, $99,750.

4. Pretax financial income for 2020, $210,000.

5. Cumulative temporary difference at December 31, 2020, giving rise to future taxable amounts, $252,000.

6. Cumulative temporary difference at December 31, 2020, giving rise to future deductible amounts, $36,750.

7. Tax rate for all years, 20%.

8. The company is expected to operate profitably in the future.

Compute income taxes payable for 2020.

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020.

Prepare the income tax expense section of the income statement for 2020, beginning with the line “Income before income taxes.”

Answer 1

1
Income taxes payable	$ 19,950		99750*20%
Temporary difference giving rise to future taxable amounts	$147,000		252000-21000/20%
				Temporary difference giving rise to future deductible amounts	$ 36,750
2
	Debit	Credit
Income tax expense	$ 42,000
Deferred Tax Asset	$    7,350		36750*20%
Income Tax payable		$ 19,950
Deferred Tax liability		$ 29,400	147000*20%

3.

Income Statement (Partial)
For the year ended December 31, 2020
Income before income taxes		$210,000
Income tax expense:
Deferred	$22,050		29400-7350
Current	$19,950
		$42,000
Net income/(loss)		$168,000