Question

Exercise 19-2 The following information is available for Swifty Corporation for 2016 (its first year of operations). 1. Excess of tax depreciation over book depreciation, $36,800. This $36,800 difference will reverse equally over the years 2017–2020. 2. Deferral, for book purposes, of $18,300 of rent received in advance. The rent will be recognized in 2017. 3. Pretax financial income, $320,500. 4. Tax rate for all years, 40%. Compute taxable income for 2016. Taxable income $ SHOW LIST OF ACCOUNTS Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2016. (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 SHOW LIST OF ACCOUNTS Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2017, assuming taxable income of $299,000. (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

Answer 1

Requirement 1			2016 tax calculation		Tax@40% on above
			Pretax financial income	320500	128200	Income tax expense
			Less : Excess tax depreciation	-36800	-14720	Deferred tax liability
			Add : Rent received in advance	18300	7320	Deferred tax asset
			Net deffered income(Expense)	-18500	-7400	Deferred tax liability-net
			Taxable income	302000	120800	Income tax payable
	Date	General journal		Debit	Credit
				Amount in $	Amount in $
	2016	Income Tax expense		128200
			Income tax payable		120800
			Deferred tax liability		7400
		To record the income tax expense for the year
		Or alternatively, instead of netting off we can pass the following journal entry
	2016	Income Tax expense		128200
		Deffered tax asset		7320
			Income tax payable		120800
			Deferred tax liability		14720
		To record the income tax expense for the year
Requirement 2			2017 tax calculation		Tax@40% on above
			Pretax financial income	299000	119600	Income tax expense
			Add : Reversal of tax depreciation	9200	3680	Deferred tax asset
			Less : Rent received in advance in 2016	-18300	-7320	Deferred tax liability
			Net deffered income(Expense)	-9100	-3640	Deferred tax liability-net
			Taxable income	289900	115960	Income tax payable
	Date	General journal		Debit	Credit
				Amount in $	Amount in $
	2017	Income Tax expense		119600
			Income tax payable		115960
			Deferred tax liability		3640
		To record the income tax expense for the year
		Or alternatively, instead of netting off we can pass the following journal entry
	2017	Income Tax expense		119600
		Deffered tax asset		3680
			Income tax payable		115960
			Deferred tax liability		7320
		To record the income tax expense for the year