Question

Conlin Corp. has one temporary difference at the end of 2019 that will reverse and cause...

Conlin Corp. has one temporary difference at the end of 2019 that will reverse and cause taxable amounts as follows:

2020: 40000

2021: 47800

2022: 36100

Stark’s pretax financial income for 2019 is 5,392,000, tax 81% for all years.There are no differed taxes at the beginning of 2019.

Instructions

1 Compute taxable income and income tax payable for 2019.

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

3 Prepare the income tax expense section of Income Statement for 2019, beginning with the line “Income before income taxes.”

Homework Answers

Answer #1

Answer 1. Computation of taxable income and income tax payable for 2019.

Pretax financial income for 2019 $5,392,000
Less: Temporary difference resulting in future taxable amounts in the year:
2020 40,000
2021 47,800
2022 36,100 (123,900)
Taxable income for 2019 $5,268,100
* Tax rate 81%
Income tax payable for 2019 $4,267,161

Answer 2. Journal entry

Accounts Titles & Explanation Debit Credit
Income tax expense 4,367,520
Income tax payable 4,267,161
Deferred tax liability [(40,000 + 47,800 + 36,100) * 81%] 100,359
[To record  income tax expense, deferred income taxes, and income taxes payable]

Answer 3.

Income tax expense section of Income Statement for 2019

Income before income taxes $5,392,000
Income tax expense
Current 4,267,161
Deferred 100,359 4,367,520
Net income after income taxes $1,024,480
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