Question

The following information is available for Oriole Corporation for 2019 (its first year of operations).

1.		Excess of tax depreciation over book depreciation, $43,800. This $43,800 difference will reverse equally over the years 2020–2023.
2.		Deferral, for book purposes, of $18,100 of rent received in advance. The rent will be recognized in 2020.
3.		Pretax financial income, $302,100.
4.		Tax rate for all years, 20%.

a. Compute taxable income for 2019.

Taxable income

$enter Taxable income in dollars

b. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2019. (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

c. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020, assuming taxable income of $309,200. (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

a.

Pretax financial income	302100
Less: Excess of tax depreciation over book depreciation	-43800
Add: Rent received in advance deferred for book purposes	18100
Taxable income $	276400

b.

Account Titles and Explanation	Debit	Credit
Income tax expense	60420
Deferred tax asset (20% x $18100)	3620
Income tax payable (20% x $276400)		55280
Deferred tax liability (20% x $43800)		8760

c.

Account Titles and Explanation	Debit	Credit
Income tax expense	63270
Deferred tax liability ($8760/4)	2190
Income tax payable (20% x $309200)		61840
Deferred tax asset		3620