The following information has been obtained for Culver Corpo

The following information has been obtained for Culver Corporation. 1. Prior to 2017, taxable income and pretax financial income were identical. 2. Pretax financial income is $1,649,000 in 2017 and $1,476,000 in 2018. 3. On January 1, 2017, equipment costing $1,140,000 is purchased. It is to be depreciated on a straight-line basis over 5 years for tax purposes and over 8 years for financial reporting purposes. (Hint: Use the half-year convention for tax purposes, as discussed in Appendix 11A.) 4. Interest of $55,000 was earned on tax-exempt municipal obligations in 2018. 5. Included in 2018 pretax financial income is a gain on discontinued operations of $183,000, which is fully taxable. 6. The tax rate is 35% for all periods. 7. Taxable income is expected in all future years. Compute taxable income and income taxes payable for 2018. Taxable income $ Income taxes payable $ Prepare the journal entry to record 2018 income tax expense, income taxes payable, and deferred taxes. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select \"No Entry\" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit Prepare the bottom portion of Culver’s 2018 income statement, beginning with “Income from continuing operations before income taxes.” (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Culver Corporation Income Statement (Partial) $ $ : $ Indicate how deferred income taxes should be presented on the December 31, 2018, balance sheet. Culver Corporation Balance Sheet $

Solution

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. 1. taxable income and income taxes payable for 2018 Pretax Financial Income 2018 1476000 Less Non Taxable Interest -55000 Less Depreciation Diff -85500 Taxable Income 1335500 Income Tax Payable 2018 35% 467425 Book Dep Tax Dep Diff Cumm Diff 35% 2017 142500 114000 28500 28500 9975 Deferred Tax Assets 2018 142500 228000 -85500 -57000 -19950 Deferred Tax Liabilities 2. Journal Entries 2018 Debit Credit Tax Expense 497350 Deferred Tax Assets 9975 Reversal of DTA Deferred Tax Liabilities 19950 Tax Payable 467425 3. Income Statement Income from Continuing Operating before income taxes 1293000 (1476000-183000) Less:Income Tax Expense 433300 497350-(183000*35%) Income from Continuing Operations 859700 Add: Income from Discont Operations 183000 Less: Tax 35% 64050 118950 Net Income 978650