Question

At the end of 2019, Culver Company has $182,000 of cumulative temporary differences that will result in reporting the following future taxable amounts.

2020		$60,200
2021		51,500
2022		40,900
2023		29,400
		$182,000

Tax rates enacted as of the beginning of 2018 are:

2018 and 2019		40	%
2020 and 2021		30	%
2022 and later		25	%

Culver’s taxable income for 2019 is $306,200. Taxable income is expected in all future years.

(a) Prepare the journal entry for Culver to record income taxes payable, deferred income taxes, and income tax expense for 2019, assuming that there were no deferred taxes at the end of 2018.

(b) Prepare the journal entry for Culver to record income taxes payable, deferred income taxes, and income tax expense for 2019, assuming that there was a balance of $22,200 in a Deferred Tax Liability account at the end of 2018.

Answer 1

Part-a Journal Entry
S. No.	Acount Tittle	Debit	Credit
a.	Income Tax Expense (BF)	$173,565.00
	Income Tax Payable (306200*40%)		$122,480.00
	Deferred Tax Liability		$51,085.00

Part-b Journal Entry- Culver company
S. No.	Acount Tittle	Debit	Credit
b.	Income Tax Expense (BF)	$151,565.00
	Income Tax Payable (306200*40%)		$122,480.00
	Deferred Tax Liability (51085-22000)		$29,085.00

Working Note
Description	2020	2021	2022	2023	Total
Future Taxable Amount	$60,200.00	$51,500.00	$40,900.00	$29,400.00	$182,000
Tax Rate	30%	30%	25%	25%
DTL	$18,060	$15,450	$10,225	$7,350	$51,085