Question

Oriole Corporation has one temporary difference at the end of 2017 that will reverse and cause taxable amounts of $54,900 in 2018, $60,000 in 2019, and $64,700 in 2020. Oriole’s pretax financial income for 2017 is $324,400, and the tax rate is 40% for all years. There are no deferred taxes at the beginning of 2017.

a. Prepare the income tax expense section of the income statement for 2017, beginning with the line “Income before income taxes.”.

Answer 1

Particulars	Amount
income before income tax	324400
Less:
Income tax for current year (Note 1)	(57920)
deffered tax (note 2)	(71840)
Income after income tax	194640

Note 1 )

Income on which tax will be charged in current year = Pretax income - deffered amount (temporary difference)

= 324400 - 54900 - 60000 -64700

= 144800

Income tax in current year = 144800*40% = 57920

Note 2)

Cal of deffered tax

deffered amount = 54900+60000+64700 = 179600

so deffered tax = 179600*40% = 71840