Zekany Corporation would have had Identical Income before taxes on both its inco

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 depreclation on an operational asset. The asset cost $240,000 and Is depreciated for Income tax purposes In the following amounts: 2016 $ 79,200 2017 105,600 2018 36,000 2019 19,200 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 depreclation expense and Income taxes for each of the four years were as follows Accounting Income before taxes and depreclation 2016 2017 2018 2019 $130,000 $150,0 00 $140,000 $140,000 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 perlods end December 31. Required: Prepare the Journal entries to record Income taxes for the years 2016 through 2019. (I no entry is required for e transaction/event, select "No Journal entry requlred" In the first account field.)

Explanation / Answer

31-12-16 Income Tax Expense 21000 (5760+15240) Deferred Tax Liability 5760 Income Tax Payable 15240 31-12-17 Income Tax Expense 33480 (13320+20160) Deferred Tax Liability 20160 Income Tax Payable 13320 31-12-18 Income Tax Expense 32000 (41600-9600) Deferred Tax Liability 9600 Income Tax Payable 41600 31-12-19 Income Tax Expense 32000 (48320-16320) Deferred Tax Liability 16320 Income Tax Payable 48320 2016 2017 2018 2019 a Pre Tax Accounting Income 130000 150000 140000 140000 b Depreciation for Tax 79200 105600 36000 19200 c=a-b Taxable Income 50800 44400 104000 120800 Tax Rate 30% 30% 40% 40% Tax Payable 15240 13320 41600 48320 2016 2017 2018 2019 Cumulative Temporary Differences Straight Line 60000 60000 60000 60000 Tax Depreciation 79200 105600 36000 19200 Temporary Differences -19200 -45600 24000 40800 0 2016 -45600 24000 40800 19200 2017 24000 40800 64800 2018 40800 40800 2019 0 Straight line depreciation=Cost-salvage/Useful Life 60000 =(240000-0)/4 2016 2017 2018 2019 a Cumulative Difference 19200 64800 40800 0 b Tax Rate 30% 40% 40% 40% c=a*b Year end Balance 5760 25920 16320 0 d Previous Balance 0 -5760 -25920 -16320 e=c+d Credit/(Debit) 5760 20160 -9600 -16320

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