ent RBKNET L SCRE EN PRINTER VERSION Exercise 19-5 The following facts relate to
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Question
ent RBKNET L SCRE EN PRINTER VERSION Exercise 19-5 The following facts relate to Concord Corporation 1. Deferred tax liability, January 1, 2017, $48,000. 2. Defemed tax asset, January 1, 2017, so 3. Taxable income for 2017, $114,000 4. Pretax financial income for 2017, $240,000. S. Cumulative temporary difference at December 31, 2017, giving rise to future taxable amounts, $288,000 6. Cumulative temporary difference at December 31, 2017, giving rise!to future deductible amounts, $42,000 7, Tax rate for all years, 40%. 8. The company is expected to operate profitably in the future. Compute income taxes payable for 2017. (Round answer to the nearest dollar amount, e.g. $1,525.) Income taxes payable pare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2017. (Credit account titles are automatically indented when amount is entered. Do indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to the nearest dollar amount, e.g. $1,525.) Account Titles and Explanation Debit CreditExplanation / Answer
1. INCOME TAX PAYABLE FOR 2017
= TAXABLE INCOME FOR 2017 X TAX RATE
= 114000 $ X 40 %
= 45600 $ (Should Be Credited to Income Tax Payable )
CLOSING DEFFERED TAX LIABILITY ON 31 DEC 2017
= CUMMULATIVE FUTURE TAXABLE AMOUNT ON 31 DEC 2017 X TAX RATE
= 288000 $ X 40 %
= 115200 $
INCREASE IN DEFFERED TAX LIABILITY ON 31 DEC 2017
= CLOSING DEFFERED TAX LIABILITY - OPENING DEFFERED TAX LIABILITY
= 115200 $ - 48000 $
= 67200 $ (Should Be Credited to Deffered Tax Liability )
CLOSING DEFFERED TAX ASSETS ON 31 DEC 2017
= CUMMULATIVE FUTURE DEDUCTIBLE AMOUNT ON 31 DEC 2017 X TAX RATE
= 42000 $ X 40 %
= 16800 $
INCREASE IN DEFFERED TAX ASSETS ON 31 DEC 2017
= CLOSING DEFFERED TAX ASSETS - OPENING DEFFERED TAX ASSETS
= 16800 $ - 0 $
= 16800 $ (Should Be Debited to Deffered Tax Asset )
INCOME TAX EXPENSE FOR 2017
= PRETAX FINANCIAL INCOME FOR 2017 X TAX RATE
= 240000 $ X 40 %
= 96000 $ (Should be Booked as an Expense)
2. JOURNAL ENTRY TO RECORD INCOME TAX EXPENSE, DEFFERED TAX AND INCOME TAX PAYABLE
3. INCOME TAX EXPENSE SECTION OF INCOME STATEMENT FOR 2017
NOTE -
1. Only Income Tax Expense A/c will reflect in Income Statement.
2. Deffered Tax Asset, Deffered Tax Liability, Income Tax Payable A/c will reflact in Balance Sheet only.
ACCOUNT TITLE DEBIT CREDIT INCOME TAX EXPENSE A/C 96000 DEFFERED TAX ASSET A/C 16800 DEFFERED TAX LIABILITY A/C 67200 INCOME TAX PAYABLE 45600Related Questions
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