In: Accounting
The companies tax rate for 2019 is 20% and will be the same for all future years.
The company expects to be profitable in future years
Required:
Solution a:
Delta Corporation | |
Schedule of pretax financial income and taxable income for 2019 | |
Particulars | Amount |
Pretax financial Income | $850,000.00 |
Permanent differences: | |
Interest on municipal securities | -$20,000.00 |
Temorary differences: | |
Depreciation Expense | -$120,000.00 |
Add: Unearned revenue | $80,000.00 |
Taxable Income | $790,000.00 |
Income tax (20%) | $158,000.00 |
Solution b:
Delta Corporation | |||
Journal Entries | |||
Date | Particulars | Debit | Credit |
31-Dec-19 | Income tax expense Dr | $166,000.00 | |
Deferred Tax Assets Dr ($80,000*30%) | $16,000.00 | ||
To Income Tax Payable | $158,000.00 | ||
To Deferred tax liability ($120,000*20%) | $24,000.00 | ||
(Being current income tax and deferred taxes) |
Solution c:
Delta Corporation | ||
Income tax expense section of Income Statement - 2019 | ||
Particulars | Amount | |
Income before Tax | $850,000.00 | |
Income Tax Expense: | ||
Current | $158,000.00 | |
Deferred taxx ($24,000 - $16,000) | $8,000.00 | $166,000.00 |
Net Income | $684,000.00 |