Question

Sunland Inc. has two temporary differences at the end of 2016. The first difference stems from installment sales, and the second one results from the accrual of a loss contingency. Sunland’s accounting department has developed a schedule of future taxable and deductible amounts related to these temporary differences as follows.

		2017		2018			2019			2020
Taxable amounts		$38,300		$51,000			$58,800			$79,300
Deductible amounts				(14,200	)		(19,800	)
		$38,300		$36,800			$39,000			$79,300

As of the beginning of 2016, the enacted tax rate is 34% for 2016 and 2017, and 38% for 2018–2021. At the beginning of 2016, the company had no deferred income taxes on its balance sheet. Taxable income for 2016 is $471,000. Taxable income is expected in all future years.

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2016. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit
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Indicate how deferred income taxes would be classified on the balance sheet at the end of 2016.
Sunland Inc Balance Sheet

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Answer 1

1.

Accounts name	Debit	Credit
Income tax expense	232100
Deferred tax asset	12920
Income tax payable (471000*0.34)		160140
Deferred tax liability		84880

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Working note:

	future taxable (deductible)	tax rate	deferred tax
			asset	liability
Temporary difference installment sale	38300	0.34		13022
installment sale (51000+58800+79300)	189100	0.38		71858
loss accrual (14200+19800)	-34000	0.38	-12920
total	193400			84880

2.

Balance sheet (Partial):

Sunland Inc
Balance Sheet partial
December 31 , 2016
Other non-current assets:
Deferred tax asset	12920
Current liabilities
Deferred tax liability	84880