Question

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

Less: additional accelerated

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

Answer 1

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)