The following information is provided by Goose Corporation: 1. Prior to 2010, ta

Question

The following information is provided by Goose Corporation:

1. Prior to 2010, taxable income and pretax financial income were identical.
2. Pretax financial income is $1,700,000 in 2010 and $1,400,000 in 2011.
3. On January 1, 2010, equipment costing $1,200,000 is purchased. It is to be depreciated on a straight-line basis over 5 years for tax purposes and over 8 years for financial reporting purposes. (Use the half-year convention for tax purposes).
4. Interest of $60,000 was earned on tax-exempt municipal obligations in 2011.
5. Included in 2011 pretax financial income is an extraordinary gain of $200,000, which is fully taxable.
6. The tax rate is 35% for all periods.
7. Taxable income is expected in all future years.

INSTRUCTIONS:

Calculate the amounts for the following journal entry to record in 2011-

Income Tax Expense- (credit)
Income Tax Payable- (debit)
Deferred Tax Asset- (debit)
Deferred Tax Liability- (debit)

Explanation / Answer

See working in your earlier post (b) Income Tax Expense Dr 469,000 Income Tax Payable Cr 437,500 Deferred Tax Liability Cr 21,000 Deferred Tax Asset Cr 10,500

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