Question

Tamarisk Corporation has one temporary difference at the end of 2017 that will reverse and cause taxable amounts of $58,100 in 2018, $62,900 in 2019, and $68,000 in 2020. Tamarisk’s pretax financial income for 2017 is $320,800, and the tax rate is 40% for all years. There are no deferred taxes at the beginning of 2017.

Compute taxable income and income taxes payable for 2017.

Taxable income		$
Income taxes payable

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2017. (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

Prepare the income tax expense section of the income statement for 2017, beginning with the line “Income before income taxes.”. (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Tamarisk Corporation Income Statement (Partial) December 31, 2017For the Year Ended December 31, 2017For the Quarter Ended December 31, 2017
CurrentDeferredDividendsExpensesIncome before Income TaxesIncome Tax ExpenseNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues		$
CurrentDeferredDividendsExpensesIncome before Income TaxesIncome Tax ExpenseNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
Current    Deferred    Dividends    Expenses    Income before Income Taxes    Income Tax Expense    Net Income / (Loss)    Retained Earnings, January 1    Retained Earnings, December 31    Revenues    Total Expenses    Total Revenues	$
Current    Deferred    Dividends    Expenses    Income before Income Taxes    Income Tax Expense    Net Income / (Loss)    Retained Earnings, January 1    Retained Earnings, December 31    Revenues    Total Expenses    Total Revenues
CurrentDeferredDividendsExpensesIncome before Income TaxesIncome Tax ExpenseNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues		$

Answer 1

1
Taxable income	131800		=320800-58100-62900-68000
X Tax rate	40%
Income taxes payable	52720
2
Account Titles and Explanation	Debit	Credit
Income tax expense	128320
Deferred tax liability		75600	=(58100+62900+68000)*40%
Income taxes payable		52720
3
Income Statement (Partial)
For the year ended December 31, 2017
Income before income taxes		320800
Income tax expense
Current	52720
Deferred	75600
		128320
Net income/(loss)		192480