Reference no: EM132503699
Blossom Company purchased equipment for $90,000 on January 2, 2020, its first day of operations. For book purposes, the equipment will be depreciated using the straight-line method over three years with no salvage value.
Pretax financial income and taxable income are as follows:
2020 2021 2022
Pretax financial income $191,800 $250,000 $290,000
Taxable income 184,000 250,000 297,800
- The temporary difference between pretax financial income and taxable income is due to the use of accelerated depreciation for tax purposes.
Question 1: Prepare the journal entries to record income taxes for all three years (expense, deferrals, and liabilities) assuming that the enacted tax rate applicable to all three years is 25%.
Question 2: Prepare the journal entries to record income taxes for all three years (expense, deferrals, and liabilities) assuming that the enacted tax rate as of 2020 is 25% but that in the middle of 2021, Congress raises the income tax rate to 30% retroactive to the beginning of 2021
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