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Exercise 19-2
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Exercise 19-2
The following information is available for Wenger Corporation for 2013.1. Excess of tax depreciation over book depreciation, $53,000. This $53,000 difference will reverse equally over the years 2014–2017. 2. Deferral, for book purposes, of $23,700 of rent received in advance. The rent will be earned in 2014. 3. Pretax financial income, $352,300. 4. Tax rate for all years, 30%.
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1) Computation of current taxes:
Pre-tax accounting Income = 352,300
Add: Timing difference (Rent) resulting into DTA = 23,700
Less: Timimg difference (Depreciation) resulting into DTL = 53,000
Taxable Income $323,000
Current taxes @30% (323,000 * 30%) = $96,900
2) Computation of Deferred taxes:
Beginning Balance of Timing Difference = 0
Add: Timing difference resulting into DTL = 53,000
Less: Timing Difference resulting into DTA = 23,700
Ending balance of timimg difference (L) = 29,300
Deferred tax Liability (29,300 * 30%) = $8,790
3) Journal Entry :
Income tax expenses Dr. 105,690
Deferred tax Liabilty Cr. 96,900
Current taxes Cr. 8,790
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