Question

Sun Packaging Services began operations in January 2018.  The company received a prepayment of $16,000 from a customer to provide packaging services at the beginning of 2019.  Sun Packaging also purchased packaging machinery for $60,000 on January 1. Sun Packaging plans to use straight-line depreciation over a four-year expected useful life for financial reporting purposes. For tax purposes, the deduction is 50% of cost in 2018, 30% in 2019, and 20% in 2020. Pretax accounting income for 2018 was $500,000, which includes interest revenue of $32,000 from municipal bonds. The enacted tax rate is 30%.

Round up to the nearest whole dollar. Do not use dollar signs but DO use commas. For example, two-hundred and fifty thousand dollars (250000) should be entered as 250,000

Income tax expense for 2018 is?

The balance in the deferred tax asset account at December 31, 2018 is?

The balance in the deferred tax liability account at December 31, 2018 is?

Sun's packaging net income for 2018 is .

Answer 1

Depreciation expense as per tax return (60000*50%)	30,000
Depreciation expense as per accounting records (60000/4)	15,000
Excess depreciation in tax return	15,000

	Pretax financial income	$         500,000
	Permanent differences
Less:	Interest income on municipal bonds	$         (32,000)
	Pretax financial income after adjusted to permanent differences	$         468,000
	Temporary differences
Less:	Excess depreciation in tax return	$         (15,000)
Add:	Unearned revenue	$           16,000
	Taxable income	$         469,000
	Multiply: Tax rate	30%
	Income tax payable	$         140,700

Pretax financial income after adjusted to permanent differences	$         468,000
Multiply: Tax Rate	30%
Income tax expense	$         140,400
Unearned revenue	$           16,000
Multiply: Tax Rate	30%
Deferred Tax Asset account at December 31, 2018	$              4,800
Excess depreciation in tax return	$           15,000
Multiply: Tax Rate	30%
Deferred Tax Liability account at December 31, 2018	$              4,500
Pretax financial income	$         500,000
Less: Income tax expense	$         140,400
Net income for 2018	$         359,600