E19.22 (LO1,4) (Two Differences, One Rate, First Year) The differences between the book basis and tax basis...

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Accounting

E19.22 (LO1,4) (TwoDifferences, One Rate, First Year) The differences betweenthe book basis and tax basis of the assets and liabilities ofMorgan Corporation at the end of 2019 are presented below.
Book Basis Tax Basis
Accounts receivable $50,000 $–0–
Litigation liability ?20,000 ?–0–
It is estimated thatthe litigation liability will be settled in 2020. The difference inaccounts receivable will result in taxable amounts of $30,000 in2020 and $20,000 in 2021. The company has taxable income of$300,000 in 2019 and is expected to have taxable income in each ofthe following 2 years. Its enacted tax rate is 34% for all years.This is the company's first year of operations.
Instructions
a.Prepare the journal entry to record income tax expense, deferredincome taxes, and income taxes payable for 2019.
b.Indicate how deferred income taxes will be reported on thestatement of financial position at the end of 2019.

	Book Basis	Tax Basis
Accounts receivable	$50,000	$–0–
Litigation liability	?20,000	?–0–

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Q1 SrNo Particulars Financial Year 2019 2020 2021 Total 1 Taxable Income 30000000 2 Tax Rate 3400 3 Tax Amount 12 10200000 Calculation of Deferred Tax Liability Accounts Receivable 3000000 2000000 5000000 Asset Litigation See Answer

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