PLEASE HELP WILL RATE Pole Co. at the end of 2018, its first year of operations,

Question

PLEASE HELP WILL RATE

Pole Co. at the end of 2018, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

Use of the depreciable assets will result in taxable amounts of $400,000 in each of the next three years. The estimated litigation expenses of $890,000 will be deductible in 2021 when settlement is expected.

(A) Prepare a schedule of future taxable and deductible amounts.

(B) Prepare the journal entry to record income tax expense, deferred taxes, and income taxes payable for 2018, assuming a tax rate of 40% for all years.

Pretax financial income $520,000 Extra depreciation taken for tax purposes (1,200,000) Estimated expenses deductible for taxes when paid 890,000 Taxable income $210,000

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A B C D=A+B+C E F=D*E G=B*E H=C*E I=G-H-F Year Pre Tax Depreciation Paid basis Taxable Income Tax Rate Income Tax Payable Deferred Tax Liability Deferred Tax Asset Total Income Tax Expense 2018 520000 -1200000 890000 210000 40% 84000 -480000 356000 208000 2019 400000 40% 0 160000 0 -160000 2020 400000 40% 0 160000 0 -160000 2021 400000 -890000 40% 0 160000 -356000 196000 Year Account Title Debit Credit 2018 Income Tax Expense 208000 Deferred Tax Asset 356000 Deferred Tax Liability 480000 Income Tax Payable 84000

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