Question

During 2017, Sheridan Co.’s first year of operations, the company reports pretax financial income at $274,600. Sheridan’s enacted tax rate is 45% for 2017 and 40% for all later years. Sheridan expects to have taxable income in each of the next 5 years. The effects on future tax returns of temporary differences existing at December 31, 2017, are summarized as follows. Future Years 2018 2019 2020 2021 2022 Total Future taxable (deductible) amounts: Installment sales $32,500 $32,500 $32,500 $97,500 Depreciation 6,000 6,000 6,000 $6,000 $6,000 30,000 Unearned rent (49,100 ) (49,100 ) (98,200 )

Complete the schedule below to compute deferred taxes at December 31, 2017.

Deferred Tax Temporary Difference Future Taxable (Deductible) Amounts Tax Rate (Asset) Liability Installment sales $97,500 % $ $ Depreciation 30,000 % $ $ Unearned rent (98,200 ) % $ Totals $ $ $

Compute taxable income for 2017.

Taxable income for 2017

Prepare the journal entry to record income taxes payable, deferred taxes, and income tax expense 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

Answer 1

Schedule to Compute Deferred Tax - Sheridan Co.
Temporary Difference	Future Taxable	Tax Rate	Deferred Tax
	(Deductible) Amounts		(Asset)	Liability
Installment sales	$97,500.00	$0.40		$39,000.00
Depreciation	$30,000.00	$0.40		$12,000.00
Unearned rent	-$98,200.00	$0.40	-$39,280.00
Totals			-$39,280.00	$51,000.00

. Computation of Taxable Income
Pretax Financial Income	$274,600.00
Less: Installment Sales	-$97,500.00
Less: Depreciation	-$30,000.00
Ad: Unearned Rent	$39,280.00
Taxable Income	$186,380.00

Journal Entry-
Date	Account Tittle	Debit	Credit
9-Jul	Income Tax Expense (bf)	$95,591.00
	Deferred tax Assets ( 20800*30%)	$39,280.00
	Deferred Tax Liability (38400*30%)		$51,000.00
	Income tax payable (186380*45%)		$83,871.00