Ray Signs Inc.s pretax accounting income was $42 million and taxable income was $8 million...
70.2K
Verified Solution
Link Copied!
Question
Accounting
Ray Signs Inc.s pretax accounting income was $42 million and taxable income was $8 million for the year ended December 31, 2021.The difference was due to three items: 1. Tax depreciation exceeds book depreciation by $30 million in 2021 for the assets acquired that year. Tax depreciation will exceed book depreciation by be $50 million in 2022 and to reverse as ($40 million) and ($40 million) in 2023 and 2024, respectively. 2. Insurance of $10 million was paid in 2021 for 2022 coverage. 3. A $6 million loss contingency was accrued in 2021, to be paid in 2023. No temporary differences existed at the beginning of 2021. The tax rate is 25%.
a. Determine the amounts necessary to record income taxes for 2021, and prepare the appropriate journal entry.
b. During 2022 a new tax law is enacted that causes the tax rate to change from 25% to 20% starting in 2023. Ray Signs pretax accounting income for 2022 was $80 million. There were no differences between accounting income and taxable income other than those described above. Determine the amounts necessary to record income taxes for 2022, and prepare the appropriate journal entry/entries.
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
