Exercise 19-4 Sunland’s tax rate is 30% for all years, and the company expects t
ID: 2401681 • Letter: E
Question
Exercise 19-4
Sunland’s tax rate is 30% for all years, and the company expects to report taxable income in all future years. There are no deferred taxes at the beginning of 2017.
a) Compute taxable income and income taxes payable for 2017.
b) Prepare 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 not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
c) Prepare the income tax expense section of the income statement for 2017, beginning with the line “Income before income taxes.” (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
d) Compute the effective income tax rate for 2017. (Round answer to 1 decimal places, e.g. 25.5%.)
Exercise 19-4
Sunland Company reports pretax financial income of $63,900 for 2017. The following items cause taxable income to be different than pretax financial income.1. Depreciation on the tax return is greater than depreciation on the income statement by $17,600. 2. Rent collected on the tax return is greater than rent recognized on the income statement by $23,300. 3. Fines for pollution appear as an expense of $11,800 on the income statement.
Sunland’s tax rate is 30% for all years, and the company expects to report taxable income in all future years. There are no deferred taxes at the beginning of 2017.
a) Compute taxable income and income taxes payable for 2017.
b) Prepare 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 not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
c) Prepare the income tax expense section of the income statement for 2017, beginning with the line “Income before income taxes.” (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
d) Compute the effective income tax rate for 2017. (Round answer to 1 decimal places, e.g. 25.5%.)
Explanation / Answer
Solution a:
Solution b:
Solution c:
Solution d:
Effective income tax rate for 2017 = $22,710 / $63,900 = 35.5%
Computation of Taxable income and income tax payable - Sunland Company for year ended 2017 Particulars Amount Pre tax financial income $63,900.00 Excess depreciation on tax return -$17,600.00 Rent collected on tax return is greater than rent recognized in income statement $23,300.00 Non deductible fines $11,800.00 Taxable Income $81,400.00 Tax rate 30% Income tax payable $24,420.00Related Questions
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