Question

Exercise 19-11

At the end of 2016, Flint Company has $181,600 of cumulative temporary differences that will result in reporting the following future taxable amounts.

2017		$60,500
2018		50,200
2019		41,700
2020		29,200
		$181,600

Tax rates enacted as of the beginning of 2015 are:

2015 and 2016		40	%
2017 and 2018		30	%
2019 and later		25	%

Flint’s taxable income for 2016 is $329,300. Taxable income is expected in all future years.

(a) Prepare the journal entry for Flint to record income taxes payable, deferred income taxes, and income tax expense for 2016, assuming that there were no deferred taxes at the end of 2015.

(b) Prepare the journal entry for Flint to record income taxes payable, deferred income taxes, and income tax expense for 2016, assuming that there was a balance of $22,300 in a Deferred Tax Liability account at the end of 2015.

Answer 1

Year	Temporary difference	Applicable tax rate	Deferred tax
2017	60,500	30%	18,150
2018	50,200	30%	15,060
2019	41,700	25%	10,425
2020	29,200	25%	7,300
		Deferred tax liability	50,935
current taxable income	329,300
Current tax rate	40%
Current tax	131,720
Solution 1
Current income tax expense       Dr	182,655
To Income tax payable		131,720
To Deferred tax liability		50,935
(Being current tax recongnized with deferred tax liability)
Solution 2
If Deferred tax liability at 2015 end	22,300
Deferred tax liability at 2016 end	50,935
Additional liability for 2016	28,635
Current income tax expense       Dr	160,355
To Income tax payable		131,720
To Deferred tax liability		28,635
(Being current tax recongnized with deferred tax liability)