E19-1 (One Temporary Difference, Future Taxable Amounts, One Rate, No Beginning
ID: 2447284 • Letter: E
Question
E19-1 (One Temporary Difference, Future Taxable Amounts, One Rate, No Beginning Deferred Taxes) South Carolina Corporation has one temporary difference at the end of 2014 that will reverse and cause taxable amounts of $55,000 in 2015, $60,000 in 2016, and $75,000 in 2017. South Carolina's pretax financial income for 2014 is $400,000 and the tax rate is 30% for all years. There are no deferred taxes at the beginning of 2014.
(a) Compute taxable income and income taxes payable for 2014. Pretax financial income for 2014 Amount Temporary difference resulting in futuretaxable amounts in year: 2014 Amount 2015 Amount 2016 Amount Formula Taxable income for 2014 Formula Enacted tax rate Percentage Income tax payable for 2014 Formula (b) Prepare the journal entry to record income tax expense, deferred income taxes, and income
taxes payable for 2014. Future Years 2014 2015 2016 Total Future taxable (deductible) amounts Amount Amount Amount Formula Tax rate Percentage Percentage Percentage Deferred tax liability (asset) Formula Formula Formula Formula Deferred tax liability at the end of 2014 Formula Deferred tax liability at the beginning of 2014 Amount Deferred tax expense for 2014(increase in deferred tax liability) Formula Current tax expense for 2014 (Income tax payable) Amount Income tax expense for 2014 Formula Account Title Formula Account Title Amount Account Title Amount (c) Prepare the income tax expense section of the income statement for 2014, beginning with the
line "Income before income taxes." Income before income taxes $400,000 Income tax expense Current Amount Deferred Amount Formula Net income after income taxes Formula
Explanation / Answer
Answer:-
(a) Compute taxable income and income taxes payable for 2014.
(b) Prepare the journal entry to record income tax expense, deferred income taxes, and income
taxes payable for 2014
Future Years
2015
2016
2017
Total
Future taxable (deductible) amounts(1)
$55,000
$60,000
$75,000
$190,000
Tax rate(2)
30%
30%
30%
Deferred tax liability (asset)(1 x 2)
$16,500
$18,000
$22,500
$57,000
Dr Income Tax Expense $120,000
Cr Income tax payable $63,000
Cr deferred Tax Liability $57,000
(c) Prepare the income tax expense section of the income statement for 2014, beginning with the
line "Income before income taxes."
Income before income taxes $400,000
Less:-
Income Tax Payable $ 63,000
Deferred Tax Liability $ 57,000 $120,000
Net Income $280,000
2014 2015 2016 2017 Pretax financial income $400,000 Temporary difference resulting in taxable amounts ($190,000) $55,000 $60,000 $75,000 Taxable income for 2014 (1) $210,000 Enacted Tax rate(2) 30% Income Tax payable for 2014(1 x 2) $63,000.0Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.