Reference no: EM132680108

Sherrod accrued an expense and related liability for estin paid future absences of $12 million relating to the compa new paid vacation program. Future compensation will be deductible on the tax return when actually paid during th next two years ($10 million in 2022; $2 million in 2023) During 2020, accounting income included an estimated 1 of $6 million from having accrued a loss contingency. Th loss is paid in 2021, at which time it is tax deductible. Balances in the deferred tax asset and deferred tax liabili accounts at January 1, 2021, were $1.8 million and $2.0 million, respectively. The enacted tax rate is 25% each year.

Required:

Problem 1. Determine the amounts necessary to record income taxes for 2021, and prepare the appropriate journal entry.

Problem 2. What is the 2021 net income?