Reference no: EM132485447
Question - The pre-tax income statements for Moonstone Ltd. for two years (summarized) were as follows:
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2018
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2019
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Revenues
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$298,000
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$362,000
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Expenses
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197,000
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253,000
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Pre-tax income
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$101,000
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$109,000
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For tax purposes, the following income tax differences existed:
1. Revenues on the 2019 statement of profit and loss include $53,000 rent, which is taxable in 2018 but was unearned at the end of 2018 for accounting purposes.
2. Expenses on the 2019 statement of profit and loss include political contributions of $20,500, which are not deductible for income tax purposes.
3. Expenses on the 2018 statement of profit and loss include $22,500 of estimated warranty costs, which are not deductible for income tax purposes until 2019.
Required -
1. What was the accounting carrying value and tax basis for unearned revenue and the warranty liability at the end of 2018 and 2019?
2. Compute (a) income tax payable, (b) deferred income tax, and (c) income tax expense for each period. Assume a tax rate of 30%. (A
3. Give the entry to record income taxes for each period.
4. Complete statements of profit and loss to include income taxes expense.
5. What amount of deferred income tax will be reported on the statement of financial position at each year-end?