Zekany Corporation would have had identical income before taxes on both its inco
ID: 2467774 • Letter: Z
Question
Zekany Corporation would have had identical income before taxes on both its income tax returns and income statements for the years 2016 through 2019 except for differences in depreciation on an operational asset. The asset cost $170,000 and is depreciated for income tax purposes in the following amounts:
The operational asset has a four-year life and no residual value. The straight-line method is used for financial reporting purposes.
Income amounts before depreciation expense and income taxes for each of the four years were as follows:
Assume the average and marginal income tax rate for 2016 and 2017 was 30%; however, during 2017 tax legislation was passed to raise the tax rate to 40% beginning in 2018. The 40% rate remained in effect through the years 2018 and 2019. Both the accounting and income tax periods end December 31.
Required: Prepare the journal entries to record income taxes for the years 2016 through 2019.
2016 $ 56,100 2017 74,800 2018 25,500 2019 13,600Explanation / Answer
The journal entries are as follows. For detailed calculations, refer to the "Notes" below the journal entries.
Notes:
1) Calculate Tax Payable
_________
2) Calculate Temporary Difference
_________
3) Calculate Deferred Tax Liability
Date Account Titles Debit Credit December 31, 2016 Income Tax Expense $15,750 Deferred Tax Liability $4,080 Income Tax Payable $11,670 December 31, 2017 Income Tax Expense $26,340 Deferred Tax Liability $14,280 Income Tax Payable $12,060 December 31, 2018 Income Tax Expense $25,000 Deferred Tax Liability $6,800 Income Tax Payable $31,800 December 31, 2018 Income Tax Expense $25,000 Deferred Tax Liability $11,560 Income Tax Payable $36,560Related Questions
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