Question

Deferred Tax Calculations (Appendix)

Wyhowski Inc. reported income from operations, before taxes, for 2015-2017 as follows:

2015	$473,000
2016	541,000
2017	634,000

When calculating income, Wyhowski deducted depreciation on plant equipment. The equipment was purchased January 1, 2015, at a cost of $196,000. The equipment is expected to last three years and have a(n) $16,000 salvage value. Wyhowski uses straight-line depreciation for book purposes. For tax purposes, depreciation on the equipment is $113,000 in 2015, $45,000 in 2016, and $22,000 in 2017. Wyhowski's tax rate is 35%.

Required:

Enter all amounts as positive numbers.

1. How much did Wyhowski pay in income tax each year? If required, round all calculations to the nearest dollar.

Year	Taxes Paid
2015	$
2016	$
2017	$

2. How much income tax expense did Wyhowski record each year?

Year	Income Tax Expense
2015	$
2016	$
2017	$

3. What is the balance in the Deferred Income Tax account at the end of 2015, 2016, and 2017? If your answer is zero, enter "0". If required, round all calculations to the nearest dollar.

Year	Balance	Debit or Credit
2015	$	Credit
2016	$	Credit
2017	$	No balance

Answer 1

Computation of Income Tax Expenses- Wyhowwski Inc.
	2015	2016	2017
Income from Operation before tax	$473,000.00	$541,000.00	$634,000.00
Tax Rate	35%	35%	35%
Income tax	$165,550.00	$189,350.00	$221,900.00
Computation of Tax Paid - Wyhowwski Inc.
	2015	2016	2017
Income from Operation before tax	$473,000.00	$541,000.00	$634,000.00
Add: Depreciation as per Books ( 196000-16000)/3	60,000.00	60,000.00	60,000.00
Less: Depreciation as per tax	$113,000.00	$45,000.00	$22,000.00
Taxable Income	$420,000.00	$556,000.00	$672,000.00
Tax Rate	35%	35%	35%
Income tax	$147,000.00	$194,600.00	$235,200.00
Part-3
	2015	2016	2017
Depreciation a s per Books ( 196000-16000)/3	60,000.00	60,000.00	60,000.00
Less: Depreciation as per tax	$113,000.00	$45,000.00	$22,000.00
Temporary Difference	(53,000.00)	15,000.00	38,000.00
Deferred Income Tax	18550	13300	0
	Credit	Credit	No Balance