Deferred Income Taxes
Seenath Ltd Use of the Depreciable Assets Will Result in Taxable Amounts

question 26

Essay

Deferred income taxes
Seenath Ltd., at the end of 2020, its first year of operations, prepared a reconciliation between pre-tax accounting income and taxable income as follows: $\begin{array}{lr}\text { Pre-tax account ing income } & \$ 300,000 \\\text { Excess CCA claimed for tax purposes } & (600,000) \\\text { Estimated expenses deduct ible when paid } & \$ 500,000 \\\text { Taxable income } & \$ 200,000\end{array}$ Use of the depreciable assets will result in taxable amounts of $ 200,000 in each of the next three years. The estimated expenses of $ 500,000 will be deductible in 2023 when settlement is expected to be made.
The enacted tax rate is 25% and is not expected to change.
Instructions
a) Prepare a schedule of the deferred taxable and deductible amounts.
b) Prepare the required adjusting journal entries to record income taxes for 2020.

Understand the adaptation of report writing based on context, audience, and purpose.

Recognize the significance of introductory material in varying report lengths.

Identify how report formality influences its components.

Comprehend the stylistic differences in report writing due to formality and audience familiarity.

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Definitions:

Cost of Production

Cost of Production refers to the total expenses incurred in manufacturing a product or delivering a service, including materials, labor, and overhead costs.

Command and Control

A leadership style characterized by strict authority and a top-down decision-making approach.

Concern for Efficiency

The focus on maximizing productivity and minimizing waste in processes or systems to achieve better outcomes or outputs.

Open System

A system that interacts with its environment by exchanging energy, materials, or information.