3. (Income Taxes) The following information is available for
Potter Corporation for 2020.
a.
Depreciation reported on the tax return exceeded depreciation
reported on the income
statement by $75,000. This difference will reverse in equal amounts
of $25,000 over the
years 2021-2023.
b. Interest received on municipal bonds was $24,000.
c. Rent collected in advance on January 1, 2020, totaled $45,000
for a 3-year period. Of this
amount, $30,000 was reported as unearned at December 31, 2020, for
book purposes.
d. The tax rates are 20% for 2020 and 17% for 2021 and
subsequent years.
e. Income taxes of $270,000 are due per the tax return for
2020.
No deferred taxes existed at the beginning of 2020.
Instructions
a.
Compute taxable income for 2020.
b.
Compute pretax financial income for 2020.
c. Prepare the journal entries to record income tax expense,
deferred income taxes, and
income taxes payable for 2020 and 2021. Assume taxable income
was $760,000 in 2021.
d.
Prepare the income tax expense section of the income statement for
2020, beginning with "income before income taxes"
