80.2K

Verified Solution

Link Copied!

Fields Inc.s pretax financial income for the first 2 years was as follows: (Note: began business on January 1, 2021) 2021 $240,000 2022 560,000 The following items caused the only differences between pretax financial income and taxable income.

1. In 2021, the company collected $420,000 of rent; of this amount, $140,000 was earned in 2021; the other $280,000 will be earned equally over the 20222023 period. The full $420,000 was included in taxable income in 2021.

2. The company pays $10,000 a year for life insurance on officers.

3. In 2022, the company terminated a top executive and agreed to $90,000 of severance pay. The amount will be paid $30,000 per year for 20222024.

The 2022 payment was made. The $90,000 was expensed in 2022. For tax purposes, the severance pay is deductible as it is paid. tax rates existing at December 31, 2021 are: 2021 20% 2023 30% 2022 25% 2024 30%

Required:

(a) Determine taxable income for 2021 and 2022.

(b) Determine the deferred income taxes at the end of 2021, and prepare the journal entry to record income taxes for 2021.

(c) Prepare a schedule of future taxable and (deductible) amounts at the end of 2022.

(d) Prepare a schedule of the deferred tax (asset) and liability at the end of 2022.

(e) Compute the net deferred tax expense (benefit) for 2022. (

f) Prepare the journal entry to record income taxes for 2022.

(g) Show how the deferred income taxes should be reported on the balance sheet at December 31, 2022.

Answer & Explanation Solved by verified expert

See Answer