For the year ended December 31, 2018, Southern Atlantic Distributors reported pretax accounting income of $975,000....

For the year ended December 31, 2018, Southern Atlantic Distributors reported pretax accounting income of $975,000. Selected information for 2018 from Southern Atlantic Distributors’ records follows:

Interest income on municipal bonds (tax-free income) $35,000

Insurance expense representing 25% of a $180,000, $45,000 4-year insurance policy that was deducted for tax purposes in 2018 when it was purchased. The policy expires at the end of 2021.

Rental revenue reported in the income statement, which $75,000 does not include an additional $25,000 of advance payment for 2019 rent. Advance payments must be included in taxable income in the year received.

Southern Atlantic’s income tax rate is 40%. At January 1, 2018, Southern Atlantic’s records indicated balances of $5,000 and $14,000 in its deferred tax asset and deferred tax liability accounts, respectively. Prepare the journal entry to record Southern Atlantic’s income taxes for 2018.

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The calculation of income tax liability and journal entry in the books of Sourthern Atlantic Distributors is attached/given in detail for better understanding.

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ekkarill92 answered 1 year ago

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