The records of Anderson Inc. provide the following information for the tax year 2020. There was no beginning balance in deferred tax account(s). Taxable income for 2020 was $60,000. Tax rate is 25%. Three temporary differences were identified: Estimated litigation accrual of $20,000, not deductible for tax purposes. Settlement not expected to take place until 2022. Excess of accelerated depreciation over GAAP depreciation of $12,000 caused a difference in the $50,000 GAAP basis and the $38,000 tax basis of equipment. One-third of the difference will reverse in 2021. Unrealized holding gain on equity securities of $3,500 not recognized for tax purposes. Anderson Inc. intends to sell the security in early 2021. The investment (accounted for under FV-NI) is reported at its fair value of $10,000 at year-end in its financial statements. a. Record the income tax journal entry on December 31, 2020.
• Note: List multiple debits (when applicable) in alphabetical order and list multiple cre
• Note: If the journal entry includes an extra line that is not required, select "N/A" as the last row of the journal entry.
Date Account Name Dr. Cr. Dec 31, 2020 Deferred Tax Asset Income Tax Expense Deferred Tax Liability Income Tax Payable 16,800 x 0x 0 Cr. 0 0 16,800 x 42,000
b. Record the income tax journal entry on December 31, 2021, assuming taxable income of $350,000.
• Note: List multiple debits (when applicable) in alphabetical order and list multiple credits (when ap
• Note: If the journal entry includes an extra line that is not required, select "N/A" as the account nam last row of the journal entry.
Date Account Name Dec 31, 2021 Deferred Tax Liability Income Tax Expense Income Tax Payable N/A Dr. 26,600 x Ox 0 0 Cr. 0 0 87,500 0