Question

# The following information pertaining Juniper Corporation is available for the year ended 2015,its first year of...

The following information pertaining Juniper Corporation is available for the year ended 2015,its first year of operations: :

Pretax financial income, \$200,000.

Excess of tax deprecation over book depreciation equals \$36,000 in 2015 (future taxable). This temporary difference (i.e., \$36,000 depreciation expense) will be reversed as follows: \$23,000 in 2016 and \$13,000 in 2017.

The tax rates of 2015, 2016 and 2017 are 30%, 25%, and 25%, respectively.

Instructions:

Compute Juniper’s 2015 taxable income.

Pretax accounting income                               \$ 200,000

depr. deducted for I/T                                     (\$36,000)

Taxable Income – 2015                                  \$ 164,000

Prepare a schedule to show the derivation of the deferred tax liability at the end of 2015.

 2015 2016 2017 Future taxable amounts \$36,000 \$23,000 \$13,000 Tax Rate 30% 25% 25% Deferred Ta.x Lia Beg. Bal. of deferred tax lia. Ending bal. of deferred tax lia Changes in deferred tax lia

Solution :

 Computation of Taxable income for 2015 Particulars Amount Pre tax financial income \$200,000.00 Less: Excess of tax depreciation over book depreciation \$36,000.00 Taxable income \$164,000.00
 Juniper corporation Computation of deferred tax liability for 2015 Year Reversal of temporary differences Tax Rate Deferred Tax Liability 2016 \$23,000.00 25% \$5,750.00 2017 \$13,000.00 25% \$3,250.00 Total \$36,000.00 \$9,000.00
 Juniper Corporation Journal Entries - 2015 Particulars Debit Credit Income tax expense Dr \$58,200.00 To Deferred Tax Liability \$9,000.00 To Income Tax Payable (\$164,000*30%) \$49,200.00 (Being income tax expense and deferred tax recorded for 2015)

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