2020 Tax Provision Practice Set Pretax Financial Income = $ 190,000 For GAAP purposes, certain revenues were accrued at

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2020 Tax Provision Practice Set Pretax Financial Income = $
190,000
For GAAP purposes, certain revenues were accrued at year-end for
$60,000. These amounts will be taxable for Tax Purposes during 2021
when collected.
The company rented office space to a tenant. The tenant paid the
2021 rent ($20,000) in advance on 12/31/20. GAAP credited unearned
revenue at 12/31/20. For Tax purposes this advance payment is
taxable upon receipt in 2020.
The company paid its 2021 liability insurance on 12/31/20 for
$15000. GAAP debited Prepaid Expenses on 12/31/20. For Tax purposes
the payment is deductible in the year paid - 2020. The company paid
life insurance premiums of $26000 related to key Officers of the
company. GAAP included these premiums as expenses in Pretax
Financial Income. These expenses are never deductible on a tax
return.
The company maintains an on-going warranty program on certain of
the products it sells. At the beginning of 2020, the GAAP records
showed a beginning balance in the Warranty Liability of $200,000 -
also the cumulative temporary difference. Related to this amount
was a beginning balance was a Deferred Tax Asset balance of
$21,000. During 2020 the Company paid warranty costs of $30,000
related to warranty agreements from 2019 and earlier. GAAP accrued
$70,000 of warranty expense in 2020 related to 2020 agreements. No
warranty costs were paid on these 2020 agreements.
The company during 2019 accrued a litigation loss of $40,000 -
also the cumulative temporary difference . This loss was not
deductible on the 2019 tax return. The company recorded a related
Deferred Tax Asset of $8400 for this future deductible amount. In
2020 the litigation liability was paid. Accordingly, the 2020
payment is now deductible on the 2020 tax return.
Tax Rates that were enacted into law for the current and future
tax years are as follows:
2020 21%
2021 and thereafter 30%
Requirements:
1 Using the "tax model" from class associated with Appendix A
and B, prepare an analysis and income tax provision journal entry
for 2020.
2 Quantify and describe the presentation of the Deferred Tax
Liabilities/Assets and I/T Payable accounts on the 12/31/20 Balance
Sheet
3 Prepare the lower portion of the Income Statement for the year
ended 12/31/20 starting with "Income before Income Taxes" and
ending with Net Income