Question

Shamrock Company reports pretax financial income of $76,100 for 2020. The following items cause taxable income to be different than pretax financial income.

1.		Depreciation on the tax return is greater than depreciation on the income statement by $16,700.
2.		Rent collected on the tax return is greater than rent recognized on the income statement by $22,700.
3.		Fines for pollution appear as an expense of $11,100 on the income statement.

(b)

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020. (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
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount

Answer 1

Solution b:

Computation of taxable income - Shamrock Company
Particulars	Amount
Pretax financial income	$76,100.00
Permanent differences:
Fines for pollution	$11,100.00
Temporary differences:
Excess depreciation as per tax over books	-$16,700.00
Rent collection is greater than rent revenue	$22,700.00
Taxable income	$93,200.00

Shamrock Company
Journal Entries
Date	Particulars	Debit	Credit
31-Dec-20	Income tax expense Dr	$26,160.00
	Deferrd tax assets Dr ($22,700*30%)	$6,810.00
	To Income taxes payable ($93,200*30%)		$27,960.00
	To Deferred tax liability ($16,700*30%)		$5,010.00
	(To record income tax expense for the year)