Question

Income Taxes

Thun Company has been in operation for several years. It has both a deductible and a taxable temporary difference. At the beginning of 2016, its deferred tax asset was $690, and its deferred tax liability was $750. The company expects its future deductible amount to be "deductible" in 2017 and its future taxable amount to be "taxable" in 2018. In 2015, Congress enacted income tax rates for future years as follows: 2016, 30%; 2017, 34%; and 2018, 35%. At the end of 2016, Thun reported income taxes payable of $25,800, an increase in its deferred tax liability of $300, and an ending balance in its deferred tax asset of $860. Thun has prepared the following schedule of items related to its income taxes for 2016.

Required:

Fill in the blanks in the following schedule.

Item	Amount
Taxable income for 2016	$
Future taxable amount, 12/31/16	$
Increase in future deductible amount during 2016	$
Income tax expense for 2016	$

Answer 1

Computation of Taxable Income for 2016
Taxable Income = Income Tax Payable / Tax Rate
=$25800/30%= $86000
Computation of Future Taxable Income
Future TAxable Income = DTL/ Tax Rate
=$1050/35%=$3000
* DTL bal at ed of 2016= Beg Bal+ Increase in DTL
=$750+$300= $1050
Computation of Increase in Future deductible amount
Future Deductible Amount = Increase in DTA/Tax Rate
$170/34%= $500
Increase in DTA = Endng DTA- Beginning DTA
=$860-$690=$170
Computation of Income Tax Expense
Income Tax Payable	25,800.00
Add: DTL	300.00
Less: DTA	-170.00
Income Tax expense	25,930.00