Question

In: Accounting

Deferred Tax Calculations (Appendix) Wyhowski Inc. reported income from operations, before taxes, for 2015-2017 as follows:...

Deferred Tax Calculations (Appendix)

Wyhowski Inc. reported income from operations, before taxes, for 2015-2017 as follows:

2015 $244,000
2016 279,000
2017 327,000

When calculating income, Wyhowski deducted depreciation on plant equipment. The equipment was purchased January 1, 2015, at a cost of $101,000. The equipment is expected to last three years and have a(n) $8,000 salvage value. Wyhowski uses straight-line depreciation for book purposes. For tax purposes, depreciation on the equipment is $58,000 in 2015, $23,000 in 2016, and $12,000 in 2017. Wyhowski's tax rate is 35%.

Required:

Enter all amounts as positive numbers.

1. How much did Wyhowski pay in income tax each year? If required, round all calculations to the nearest dollar.

Year Taxes Paid
2015 $fill in the blank 1
2016 $fill in the blank 2
2017 $fill in the blank 3

2. How much income tax expense did Wyhowski record each year?

Year Income Tax Expense
2015 $fill in the blank 4
2016 $fill in the blank 5
2017 $fill in the blank 6

3. What is the balance in the Deferred Income Tax account at the end of 2015, 2016, and 2017? If your answer is zero, enter "0". If required, round all calculations to the nearest dollar.

Year Balance Debit or Credit
2015 $fill in the blank 7 Credit
2016 $fill in the blank 9 Credit
2017 $fill in the blank 11 No balance

Solutions

Expert Solution

Part-1
Year Tax Paid
2015 $75,950.00
2016 $100,450.00
2017 $121,100.00
Part-2
Year Tax Expense
2015 $85,400.00
2016 $97,650.00
2017 $114,450.00
Part-3
Year Debit or Credit Amount
2015 Credit $9,450.00
2016 Debit $6650
2017 Nil Balance 0

Detail working Note for your easy understanding

Working Note: Wyhowski Inc.
2015 2016 2017
Incomebefore tax (a) $244,000.00 $279,000.00 $327,000.00
Add: Depreciaiton as per Books $31,000.00 $31,000.00 $31,000.00
Less: Deprecoation as per Tax $58,000.00 $23,000.00 $12,000.00
Taxable Income (b) $217,000.00 $287,000.00 $346,000.00
Income Tax Payable (b*35%) $75,950.00 $100,450.00 $121,100.00
Incoem Tax Expensse (a*35%) $85,400.00 $97,650.00 $114,450.00
Deferred Income tax Expense $9,450.00 -$2,800.00 -$6,650.00
Working Note
Depreciaiton as per SLM= (101000-8000)/3=$31000

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