Question

Exercise 19-01 Oriole Corporation has one temporary difference at the end of 2020 that will reverse and cause taxable amounts of $59,400 in 2021, $64,200 in 2022, and $69,700 in 2023. Oriole’s pretax financial income for 2020 is $316,600, and the tax rate is 30% for all years. There are no deferred taxes at the beginning of 2020.

1. Compute taxable income and income taxes payable for 2020. 2. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) 3. Prepare the income tax expense section of the income statement for 2020, beginning with the line “Income before income taxes.”. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Answer 1

Solution:
1	Compute taxable income and income taxes payable for 2020
	Pre - tax financial income	$316,600
	Less: Future taxable amount	$193,300
	($59,400+$64,200+$69,700)
	Taxable income	$123,300
	Income tax payable
	($123,300*30%)	$36,990
2	Journal Entry
	Deferred tax laibility at the end of 2020 =Future taxable amount * Tax rate
	= $193,300*30%
	= $57,990
Date	Particulars	Debit	Credit
	Income tax expense ($316,600*30%)	$94,980
	Income tax payable		$36,990
	Deferred Tax liability		$57,990
	(Being Income tax expense, Income tax
	payable and deferred liability recorded)
3	Income tax expense section of Income statement 2020
	Oriole Corporation
	Income Statement (Partial)
	Income before taxes		$316,600
	Less: Income tax expenses
	Current	$36,990
	Deferred	$57,990	($94,980)
	Net income after tax		$221,620
	Please upvote , if found the answer useful.
	For any clarification, Feel free to reach at comment Section