Rose Inc
Subject:AccountingPrice: Bought3
Rose Inc. reported a pretax accounting income of $84 million for 2021. The following information relates to the differences between pretax accounting income and taxable income.
A) income from installment sales of properties included in pretax accounting income in 2021 excided that reported for tax purpose by $3 million.
The installment receivable account at year-end 2021 had a balance of $4 million (representing a portion of2020 and 2021 installment sales), expected to be collected equally in 2022 and 2023
B) Rose was assessed a penalty of $4 million by the environmental protection agency for violating a Federal law in 2021. The fine is to be paid in equal amounts in 2021 and 2022
C) Rose rents its operating facility but owns one asset acquired in 2020 at the cost of $88 million. Depreciation is reported by the straight-line method, assuming a four-year useful life. On the tax return, a deduction for depreciation will be more than straight-line depreciation the first two years but less than straight-line depreciation the next two years ($ in millions)
Income Statement Tax Return Difference
2020 $22 $29 $(7)
2021 22 36 (14)
2022 22 13 9
2023 22 10 12
________________ ______________ _____________
$88 $88 $0
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D) For tax purposes, warranty expense is deducted when costs are incurred. The balance of the warrant liability was $1 million at the end of 2020. Warranty expense of $3 million is recognized in the income statement in 2021. $2 million of cost is incurred in 2021, and another $ 3 million of cost is anticipated in 2022. On December 31, 2021, the warranty liability is $2 million (after adjusting entry)
E) In 2021, Rose Inc. accrued an expense and related liabilities for an estimated paid future absence of $8 million related to its new paid version program. Future compensation will be deductible on the tax return when actually paid during the next two years ($5million 2022, 3million in 2023)
F) During 2020, accounting income included an estimated loss of $4million from having accrued a loss contingency. The loss paid is paid in 2021, at which time it is tac deductible.
Balances in the deferred tax asset and deferred tax liability accounts on January 1, 2021, were $1.3 million and $2 million, respectively. The enacted tax rate is 25% each year.
Please work on the following problems.
1) Determine the amounts necessary to record income tax for 2021 and make the appropriate journal entry
2) what is the 2021 net income
3) Show how any deferred tax amount should be classified and reported in the 2021 balance sheet.
Enter the answer to the question in the table below
1 2 3
Calculate the amount necessary to record income tax for 2021 and make the appropriate journal entry. (if no entry is needed for a transaction/event, select "no journal entry needed" in the first account field. Enter your answers in millions rounded to 2 decimal places (I.e.,5,5000,000 should be 5.50).)
Journal entry worksheet
1
Record 2021 Income Taxes
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Event General Journal Debit Credit
___________________ ___________________________________________________________________
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Answer the question below by entering the table below
1 2 3
What is the 2021 net income (enter your answers in millions rounded to 2 decimal places, I.e., $5,500,0000 as 5.50.)
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Net income for 2021_______________ million________
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Answer the questions below by entering in the table
1 2 3
Show how any deferred tax amounts should be classified and reported in the 2021 balance sheet. (enter your answer in millions rounded to 2 decimal places (I.e.,5,500, 000 should be entered as 5.50).)
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Deferred Tax in million
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Classification Amount
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