rm Exam Chapters 16 17 and 18 6 Help SaveExit Subhit Zekany

rm Exam Chapters 16 17 and 18 6 Help Save&Exit; Subhit Zekany Corporation would have had identical income before taxes on both its income tax returns and income statements for the years 2018 through 2021 except for differences in depreciation on an operational asset. The asset cost $240,000 and is depreciated for income tax purposes in the following amounts 2018 79,200 2019 105,600 2020 2021 19,200 36,000 The operational asset has a four-year life and no residual value. The straight-line method is used for financial reporting purposes. Income amounts before depreciation expense and income taxes for each of the four years were as follows Accounting income before taxes and depreciation 130,000 $150,000 $140,000 $140,000 Assume the average and marginal income tax rate for 2018 and 2019 was 30%, however, during 2019 tax legislation was passed to raise the tax rate to 40% beginning in 2020 The 40% rate remained n effect through the years 2020 and 2021. Both the accounting and income tax periods end December 31 Required: Prepare the journal entries to record income taxes for the years 2018 through 2021. (If no entry is required for a transaction/event, select \"No journal entry required\" in the first account field.) BRELI 8

Solution

As per Income tax 2018 2019 2020 2021 Accounting income before taxes and depreciation 130000 155000 140000 140000 Less : Depreciation for tax 79200 105600 36000 19200 Taxable Income 50800 49400 104000 120800 Income Tax rate 30% 30% 40% 40% Tax Payable 15240 14820 41600 48320 2018 2019 2020 2021 Staright Line 60000 60000 60000 60000 Tax depreciation 79200 105600 36000 19200 Temporary difference -19200 -45600 24000 40800 2018 2019 2020 2021 Cumulative difference 19200 64800 40800 0 Tax rate 30% 40% 40% 40% 5760 25920 16320 0 Previous Balance -5760 -25920 -16320 Credit/(debit) 5760 20160 -9600 -16320 Journal Entry 1) 31-Dec-18 Income Tax expense 21000 To deferred tax liability 5760 To Income tax payable 15240 31-Dec-19 Income Tax expense 34980 To deferred tax liability 20160 To Income tax payable 14820 31-Dec-20 Income Tax expense 32000 Deferred tax liability 9600 To Income tax payable 41600 31-Dec-21 Income Tax expense 32000 Deferred tax liability 16320 To Income tax payable 48320