Question

Wicks Corporation began operations on January 1, 2019. At the end of 2019, Wicks reported pretax financial income of $59,200 and taxable income of $59,230, due to two temporary differences. The income tax rate is 25% for 2019 through 2021, but Congress has enacted a tax rate of 35% for 2022 and beyond. To determine its deferred taxes, Wicks prepared the following schedule of expected future taxable and deductible amounts for the two temporary differences:

	2020	2021	2022	2023
Future taxable amounts	$4,500	$4,100	$5,000	$3,800
Future deductible amount			(15,200)

Required:

1.	Prepare Wicks’s income tax journal entry at the end of 2019. Assume a valuation allowance is not required.
2.	Prepare the lower portion of the 2019 income statement for Wicks.

CHART OF ACCOUNTS

Wicks Corporation

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
160	Deferred Tax Asset
181	Equipment
198	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Revenue
260	Deferred Tax Liability
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
910	Income Tax Expense

Answer 1