The following facts relate to Alschuler Corporation. 1.Deferred tax liability, J
ID: 2387015 • Letter: T
Question
The following facts relate to Alschuler Corporation.
1.Deferred tax liability, January 1, 2010, $40,000.
2.Deferred tax asset, January 1, 2010, $0.
3.Taxable income for 2010, $167,900.
4.Pretax financial income for 2010, $330,700.
5.Cumulative temporary difference at December 31, 2010, giving rise to future taxable amounts, $321,200.
6.Cumulative temporary difference at December 31, 2010, giving rise to future deductible amounts, $58,400.
7.Tax rate for all years, 40%.
8.The company is expected to operate profitably in the future.
(a) Compute income taxes payable for 2010.
(b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2010. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)
(c) Prepare the income tax expense section of the income statement for 2010, beginning with the line "Income before income taxes."
Explanation / Answer
a) Taxable Income for 2010 167,900 Taxation @ 40% = 167,900*40% Income tax payable for 2010 67,160 b) Computation of deferred tax asset/ liability Cumulative temporary difference at December 31, 2010, giving rise to future taxable amounts 321,200 Less: Cumulative temporary difference at December 31, 2010, giving rise to future deductible amounts 58,400 Net future taxable amount 262,800 Therfore, Total deferred tax liability @ 40% 105,120 Less: Opening deferred tax liability 40,000 Net deferred tax liability to be provided in 2010 65,120 Income tax expense A/c………..Dr 67,160 To Income tax payable A/c 67,160 (Being tax provided for 2010) Income summary A/c………Debit 65,120 To Deferred tax liability A/c 65,120 c) Income before taxes 330,700 Less: Income tax 67,160 : Deferred tax liability 65,120 Profit after tax 198,420
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