Question

Rowen, Inc. had pre-tax accounting income of $900,000 and a tax rate of 40% in 2010, its first year of operations. During 2015 the company had the following transactions:

Received rent from Jane, Co. for 2016	$32,000
Government bonds interest income	$40,000
Depreciation for tax purposes in excess of book depreciation	$20,000
Installment sales revenue to be collected in 2016	$54,000

89.     For 2015, what is the amount of income taxes payable for Rowen, Inc?

a.   $301,600

b.   $327,200

c.   $343,200

d.   $386,400

90.     At the end of 2015, which of the following deferred tax accounts and balances is reported on Rowen, Inc.’s statement of financial position?

              Account      _             Balance

a.   Deferred tax asset            $12,800

b.   Deferred tax liability          $12,800

c.   Deferred tax asset            $20,800

d.         Deferred tax liability    $20,800

Answer 1

SOLUTION

89. Income tax payable = $327,200

	Amount ($)
Pre-tax accounting income	900,000
Received rent from Jane, Co. for 2016	32,000
Less: Government bonds interest income	(40,000)
Depreciation for tax purposes in excess of book depreciation	(20,000)
Installment sales revenue to be collected in 2016	(54,000)
Taxable income	818,000

Income tax payable = $818,000 * 40% = $327,200

90. Correct option - Deferred tax asset = $12,800

Deferred tax asset = $32,000 * 40% = $12,800