Problem 164 Change in tax rate record taxes for four years L

Problem 16-4 Change in tax rate; record taxes for four years [L016-1, 16-5] Zekany Corporation would have had identical income before taxes on both its income tax returns and income statements for the years 2016 through 2019 except for differences in depreciation on an operational asset. The asset cost $160,000 and is depreciated for income tax purposes in the following amounts 2016 $52,800 2017 2018 2019 70,400 24,000 12,800 The operational asset has a four-year life and no residual value. The straight-line method is used for financial reporting purposes and income taxes for each of the four years were as Income amounts before depreciation expense follows 2016 $90,000 $110,000 $100,000 $100,000 2017 2018 2019 Accounting income before taxes and depreciation Assume the average and marginal income tax rate for 2016 and 2017 was 30%; however, during 2017 tax legislation was passed to raise the tax rate to 40% beginning in 2018, The 40% rate remained in effect through the years 2018 and 2019. Both the accounting and income tax periods end December 31 Required Prepare the journal entries to record income taxes for the years 2016 through 2019. (If no entry is required for a transaction/event, select \"No journal entry required\" in the first account field.)

Solution

Solution:

Computation of Taxable Income and Income Tax Payable
Particulars	2016	2017	2018	2019
Accounting income before taxes and depreciation	$90,000.00	$110,000.00	$100,000.00	$100,000.00
Less: Depreciation as per Income tax	$52,800.00	$70,400.00	$24,000.00	$12,800.00
Taxable Income	$37,200.00	$39,600.00	$76,000.00	$87,200.00
Income Tax Payable	$11,160.00	$11,880.00	$30,400.00	$34,880.00