Nirvana Corporation reports pretax financial income of $260,000 for 2022. The following items cause taxable income to be different than pretax financial income. Rental income on the 2022 tax return is $65,000 greater than on the income statement. Depreciation expense on the tax return is greater than depreciation on the income statement by $40,000. Interest on an investment in a municipal bond of $6,500 is reported on the income statement. Nirvana's tax rate is 25% for all years. There are no deferred taxes at the beginning of 2022. The company expects to realize only 40% of the benefit of any deferred tax assets. The fiscal year ends December 31, 2022. Required: 1. Prepare the journal entries to record i) income tax expense, income taxes payable, and deferred income taxes for 2022, and ii) any valuation allowance needed. 2. Indicate clearly what would be reported on the income statement beginning with income before income taxes for the year ended December 31, 2022 from just the journal entries you prepared in part a. 3. Indicate clearly what would be reported on the classified balance sheet as of December 31, 2022 from just the journal entries you prepared in part a. 4. Provide the breakdown of income tax expense needed for footnote disclosure.
Nirvana Corporation reports pretax financial income of $260,000 for 2022. The following items cause taxable income to be different than pretax financial income.
Rental income on the 2022 tax return is $65,000 greater than on the income statement.
Interest on an investment in a municipal bond of $6,500 is reported on the income statement.
Nirvana's tax rate is 25% for all years. There are no
Required:
1. Prepare the
2. Indicate clearly what would be reported on the income statement beginning with income before income taxes for the year ended December 31, 2022 from just the journal entries you prepared in part a.
3. Indicate clearly what would be reported on the classified balance sheet as of December 31, 2022 from just the journal entries you prepared in part a.
4. Provide the breakdown of income tax expense needed for footnote disclosure.
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