Reference no: EM132462767
In 2020, RST Corporation has $75,000 of income before taxes in its accounting records. In computing income tax expense, RST makes the following observations of differences between the accounting records and the tax return:
Point 1. An accelerated depreciation method is used for tax purposes. In 2020, RST reports $6,000 more depreciation expense for tax purposes than it shows in the accounting records.
Point 2. In 2020, RST collected $60,000 from a business that is renting a portion of its warehouse. The $60,000 covers the rental payment for the four years 2021-2024, and therefore no rental revenue has been recognized for 2020. However, XYZ must pay taxes on the entire amount collected in 2020.
The enacted tax rate in 2020 is 21% and is 23% in 2021 and years following.
Required:
Question A. Calculate taxable income for 2020.
Question B. Prepare the journal entry necessary to record income taxes at the end of 2020.
Question C. How would any deferred tax amounts be reported on a classified balance sheet?
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