Question

The following information is available for Concord Corporation for 2019 (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 2020–2023.
2. Deferral, for book purposes, of $20,300 of rent received in advance. The rent will be recognized in 2020.
3. Pretax financial income, $322,400.
4. Tax rate for all years, 20%.
A. Compute taxable income for 2019.
B. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2019.
C. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020, assuming taxable income is $325,000

Answer 1

a.

Taxable income for 2019 305,900

b.

Dr Income tax expense 64,480

Dr Deferred Tax Asset 4,060

Cr Deferred Tax Liability7,360

Cr Income tax payable61,180

c

Dr Income tax expense 67,220

DrDeferred Tax Liability 1,840

Cr Deferred Tax Asset 4,060

Cr Income tax payable 65,000

Step-by-step explanation:

a.

Pretax financial income 322,400

Less: Excess of tax depreciation -36,800

Add: Rent received in advance 20,300

Taxable income for 2019 305,900

b.

Account titles and Explanation Debit Credit

Dr Income tax expense 64,480

Dr Deferred Tax Asset 4,060 (20,300*20%)

Cr Deferred Tax Liability 7,360 (36,800*20%)

Cr Income tax payable 61,180 (305,900*20%)

c

Account titles and Explanation Debit Credit

Dr Income tax expense 67,220

DrDeferred Tax Liability 1,840

(7,360/4)

Cr Deferred Tax Asset 4,060

Cr Income tax payable 65,000 (325,000*20%)