Question

The pretax financial income of T Company differs from its taxable income throughout each of 4 years as follows.
            Pretax Year           
             Financial          Taxable     
             Income             Income         Tax Rate
2017     $290000         $180000           35%
2018       320000            225000           40
2019       350000            260000           40
2020       420000            560000           40

The difference between pretax financial income and taxable income in each period is due to a temporary diffence related to depreciation. No deferred income taxes existed at the beginning of 2017.
Required:
a) Prepare journal entries to record income taxes in all 4 years.
Navigate to appropriate sections of the Accounting Standards Codification (ASC) to identify answers to the following questions.
a) the appropriate citation from the ASC.
b) the use of your own words rather than the text of the ASC to provide the simplest and clearest answer to the question.

Question 1:
What are the basis requirements that are applied in accounting for income taxes at the date of the financial statements?

Question 2:
Provide on example each of a futue taxable difference, and a future deductible difference.

Question 3:
What is the applicable tax rate used to measure deferred taxes?

Answer 1

a)		Debit	Credit		W.N
2017	Income Tax Expense	101500			=290000*0.35	101500
	Deferred Tax Liability		38500
	Income Tax Payable		63000		=180000*0.35	63000
2018	Income Tax Expense	5500			=(290000-180000)*0.05	5500
	Deferred Tax Liability		5500
	To record increase tax rate
	Income Tax Expense	128000			=320000*0.4	128000
	Deferred Tax Liability		38000
	Income Tax Payable		90000		=225000*0.4	90000
2019	Income Tax Expense	140000			=350000*0.4	140000
	Deferred Tax Liability		36000
	Income Tax Payable		104000		=260000*0.4	104000
2020	Income Tax Expense	168000			=420000*0.4	168000
	Deferred Tax Liability	56000
	Income Tax Payable		224000		=560000*0.4	224000