Question

ABC LLC. has two temporary differences at the end of 2019. The first difference stems from installment sales, and the second one results from the accrual of a loss contingency. ABC’s accounting department has developed a schedule of future taxable and deductible amounts related to these temporary differences as follows.

		2020		2021			2022			2023
Taxable amounts		$41,800		$52,100			$59,600			$75,200
Deductible amounts				(15,700)			(17,400)
		$41,800		$36,400			$42,200			$75,200

As of the beginning of 2019, the enacted tax rate is 34% for 2019 and 2020, and 20% for 2021–2024. At the beginning of 2019, the company had no deferred income taxes on its balance sheet. Taxable income for 2019 is $531,000. Taxable income is expected in all future years.

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

indicate how deferred income taxes would be classified on the balance sheet at the end of 2019.

Answer 1

a
	particular	debit	credit
	Income Tax Expense	225,512
	Deferred Tax Asset	6,620		=(15,700+17,400)*20%
	Income Tax Payable		180,540	=531,000*34%
	Deferred Tax Liability		51,592	=(41,800*34%)+(52,100+59,600+75,200)*20%
	b
		ABC LLC
		Balance Sheet
		Dec 31,2019
	Other Assets (non Current)
	Deferred Tax asset	6,620
	Current Liabilities
	Deferred Tax Liability	51,592