A. Income Taxes The following differences enter into the reconciliation of financial income and taxable income of Abbott Company for the year ended December 31, 2017, its first year of operations. The enacted income tax rate is 30% for all years.
Pretax financial income $800,000
Excess tax depreciation (480,000)
Unearned rent revenue deferred on the books 60,000
but appropriately recognized in taxable income
Taxable income $380,000
1. Excess tax depreciation will reverse equally over a four-year period, 2018-2021.
2. Rent revenue will be recognized during the last year of the lease, 2021.
Required: 1. Prepare a schedule of future taxable and (deductible) amounts and calculate the deferred tax asset and liability at the end of 2017.
2. Prepare the journal entry to record income tax expense, deferred taxes, and the income taxes payable for 2017.
|1||Schedule of future taxable and (deductible) amounts:|
|Deferred tax liability=480000*30%=$ 144000|
|Deferred tax Asset=60000*30%=$ 18000|
|Income tax expense||240000|
|Deferred tax asset||18000|
|Deferred tax liability||144000|
|Income tax payable||(380000*30%)||114000|
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