Question

Sweet Corporation began 2017 with a $45,000 balance in the Deferred Tax Liability account. At the end of 2017, the related cumulative temporary difference amounts to $174,000, and it will reverse evenly over the next 2 years. Pretax accounting income for 2017 is $354,000, the tax rate for all years is 40%, and taxable income for 2017 is $318,000.

Income taxes payable for 2017? $______

B.) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2017.

C.)Prepare the income tax expense section of the income statement for 2017 beginning with the line “Income before income taxes”. (Enter loss using either a negative sign preceding the number e.g. -2,945 or parentheses e.g. (2,945).)

Answer 1

Computation of Taxable Income
Taxable income for 2017	$318,000
Enacted tax rate	40%
Income tax payable for 2017	$127,200
(B)Preparation of Journal Entry
Accounts Title and Explanation	Debit(in $)	Credit (in $)
Income Tax Expense ($354,000 * 40%)	$141,600
Income Tax Payable		$127,200
Deferred Tax Liability		$14,400
(C)Prepare the income tax expense section of the income statement for 2017
Sweet Corporation Income Statement (Partial) year Ended December 31,2017
Income before income taxes		$354,000
Income tax expense - Deferred	$14,400
Income tax expense -Current	$127,200
		$141,600
Net Income		$212,400