Question

1.		Deferred tax liability, January 1, 2017, $70,200.
2.		Deferred tax asset, January 1, 2017, $23,400.
3.		Taxable income for 2017, $122,850.
4.		Cumulative temporary difference at December 31, 2017, giving rise to future taxable amounts, $269,100.
5.		Cumulative temporary difference at December 31, 2017, giving rise to future deductible amounts, $111,150.
6.		Tax rate for all years, 40%. No permanent differences exist.
7.		The company is expected to operate profitably in the future.

Compute the amount of pretax financial income for 2017.

Pretax financial income

$

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

Account Titles and Explanation	Debit	Credit

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. -45 or parentheses e.g. (45).) Carla Corporation Income Statement (Partial) $ $ $

Compute the effective tax rate for 2017. (Round answer to 0 decimal places, e.g. 25%)

The effective tax rate

%

Answer 1

Answer
1)
Taxable income	$    122,850
Add: Future taxable amounts arsisng during the year	$      93,600	269100-(70200/40%)
Less: Future deductible amounts arsisng during the year	$      52,650	111150-(23400/40%)
Pretax financial income	$    163,800
2)
Account Title	Debit	Credit
Income Tax Expense	$      65,520		163800*40%
Deferred Tax Asset	$      21,060		52650*40%
Income Tax Payable		$                    49,140	122850*40%
Deferred Tax Liability		$                    37,440	93600*40%
3)
Carla Corporation
Income Statement (Partial)
For the year ended 2017
Particulars		Amount
Income before taxes		$                  163,800
Less - Tax Payable		$                    65,520
Net Income tax after tax		$                    98,280
4)
Effective Tax Rate = Taxes Payable / Financial Income = 49140/163800 = 30%