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How do prepare the journal entry to record income taxes

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Reference no: EM132942469

Income Taxes Prosser Systems began operations in 2020. Prosser has a tax rate of 40%. That year the company reported pretax accounting income of $70 million, which included the following amounts:

  • Compensation expense of $3 million related to employee stock option plans granted to organizers was reported in the 2020 income statement. This expense is not deductible for tax purposes (permanent).
  • An asset with four-year useful life was acquired at the beginning of 2020. It is depreciated by the straight-line method in the income statement. On the tax return, the company reported depreciation expenses of $48 million in excess of the straight-line method.

Required:

Problem a. Calculate taxable income for 2020.

Problem b. Prepare the journal entry to record income taxes for 2020.

Problem c. Prepare the income statement for 2020.

Reference no: EM132942469

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