Reference no: EM132573422

Question - Redding Corporation has $75,000 of income before taxes in its 2020 accounting records. In computing income tax expense, Redding makes the following observations of differences between the accounting records and the tax return:

1. An accelerated depreciation method is used for tax purposes. In 2020, Redding reports $6,000 more depreciation expense for tax purposes than it shows in the accounting records. The excess depreciation is expected to reverse in 2023.

2. In 2020, Redding 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%. It is 23% in 2021 and is 24% in 2022 and years following.

Required -

A. Calculate taxable income for 2020.

B. Prepare the journal entry necessary to record income taxes at the end of 2020.

C. How would any deferred tax amounts be reported on a classi?ed balance sheet?