Exercise 19-13 At the end of 2013, Lucretia McEvil Company has $191,670 of cumul

Question

Exercise 19-13

At the end of 2013, Lucretia McEvil Company has $191,670 of cumulative temporary differences that will result in reporting future taxable amounts as follows.

2014 $68,740

2015 52,830

2016 47,400

2017 22,700

----------------

Total:

$191,670

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 $343,830. 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.

(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 $34,330 in a Deferred Tax Liability account at the end of 2012.

(Could you show me the steps and calcauation, thank you!!

Explanation / Answer

(a) income tax expense Dr. 214200

   To deferred tax liability(191670 * 40%) $76668

   To income tax payable(343830 *40%) $137532

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