Question

The following information is available for Monty Corporation for 2019 (its first year of operations).

1.		Excess of tax depreciation over book depreciation, $41,200. This $41,200 difference will reverse equally over the years 2020–2023.
2.		Deferral, for book purposes, of $19,800 of rent received in advance. The rent will be recognized in 2020.
3.		Pretax financial income, $273,100.
4.		Tax rate for all years, 20%.

Compute taxable income for 2019.

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2019.

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020, assuming taxable income of $303,700.

Answer 1

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you.
Part a
Pretax Financial Income for 2019		$   273,100
Excess of tax depreciation over book Dep		$    -41,200
Rent received in advance		$     19,800
Taxable Income for 2019		$   251,700
Part b
Income Tax Expense	$ 54,620
Deferred Tax Assets ($19,800*20%)	$    3,960
Income Tax Payable ($251,700*20%)		$     50,340
Deferred Tax Liability ($41,200*20%)		$        8,240
Part c
Income Tax Expense	$ 62,640
Deferred Tax LIability ($10,300*20%)	$    2,060
Income Tax Payable ($303,700*20%)		$     60,740
Deferred Tax Asset ($19,800*20%)		$        3,960
$41,200/4 Years to reverse=$10,300