Question

During 2018, Dream Catcher Company first year of operations, the company reported pretax financial income of...

During 2018, Dream Catcher Company first year of operations, the company reported pretax financial income of $580,000. Dream catcher’s enacted tax rate is 35% for 2018 and 40% for all later years. Dream Catcher expects to have taxable income in each of the next 5 years. The effects on future tax returns of temporary differences existing at December 31, 2018, are summarized below.
                                                                         Future Value

Details 2019 2020 2021 2022 2023 Total
Future taxable(deductible amounts)
installment sales $80000 $80000 $80000 240000
Depreciation $12000 $12000 $12000 $12000 $12000 $60000
Unearned Rent ($35000) ($35000) ($70000)

Instructions
(a) Prepare a schedule to show the calculation of deferred taxes at December 31, 2018.

(b) Compute taxable income for 2018.
(c) Prepare the journal entry to record income taxes payable, deferred taxes and income tax expense for 2018.

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