At the end of 2013, Lucretia McEvil Company has $185,040 of cumulative temporary
ID: 2421780 • Letter: A
Question
At the end of 2013, Lucretia McEvil Company has $185,040 of cumulative temporary differences that will result in reporting future taxable amounts as follows. 2014 $64,700 2015 56,140 2016 40,200 2017 24,000 $185,040 Tax rates enacted as of the beginning of 2012 are: 2012 and 2013 40 % 2014 and 2015 30 % 2016 and later 25 % McEvil’s taxable income for 2013 is $344,600. Taxable income is expected in all future years.
(a) Prepare the journal entry for McEvil to record income taxes payable, deferred income taxes, and income tax expense for 2013, assuming that there were no deferred taxes at the end of 2012. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Entry field with correct answer Income Tax Expense Entry field with incorrect answer 158892 Entry field with correct answer Entry field with correct answer Deferred Tax Liability Entry field with correct answer Entry field with incorrect answer 74016 Entry field with correct answer Income Tax Payable Entry field with correct answer Entry field with correct answer 137840
(b) Prepare the journal entry for McEvil to record income taxes payable, deferred income taxes, and income tax expense for 2013, assuming that there was a balance of $30,660 in a Deferred Tax Liability account at the end of 2012. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Entry field with correct answer Income Tax Expense Entry field with incorrect answer Entry field with correct answer Entry field with correct answer Deferred Tax Liability Entry field with correct answer Entry field with incorrect answer Entry field with correct answer Income Tax Payable Entry field with correct answer Entry field with incorrect answer
Explanation / Answer
a) Income tax expense $190,142
Deffered tax liability $52,302
Income tax payable $137,840 ($344,600 * .40)
Deffered tax liability = $64,700 + $56,140 = $120,840 * .3= $36,252
$40,200 + $24,000 = $64,200 * .25 =$16,050
$52,302
b) Income tax expense $159,482
Deffered tax liability $21,642
Income tax payable $137,840 ($344,600 * .40)
Deffered tax liability = $64,700 + $56,140 = $120,840 * .3= $36,252
$40,200 + $24,000 = $64,200 * .25 =$16,050
$52,302
less beginning balance $30,660
$21,642
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