Week 4 - E19-3 (One Temporary Difference, Future Taxable...

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Unformatted text preview: E19-3 (One Temporary Difference, Future Taxable Amounts, One Rate, Beginning Deferred Taxes) Bandung Corporation began 2007 with a $92,000 balance in the Deferred Tax Liability account. At the end of 2007, the related cumulative temporary difference amounts to $350,000, and it will reverse evenly over the next 2 years. Pretax accounting income for 2007 is $525,000, the tax rate for all years is 40%, and taxable income for 2007 is $405,000. Instructions (a) Compute income taxes payable for 2007. Taxable income for 2007 405,000 Enacted Tax Rate 40%___ Income Tax Payable 162,000 (b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2007. Deferred tax liability at the end of 2007 48,000 Deferred tax liability at the end of 2008 92,000 Deferred tax expense for 2007 140,000 (increase required in deferred tax liability) Current tax expense for 2007 210,000 Income tax expense 350,000 2007- JE Income Tax Expense 350,000 Deferred tax liability 210,000 Deferred tax expense 140,000 (c) Prepare the income tax expense section of the income statement for 2007 beginning with the line Income before income taxes. Banding Corporation Income Statement for 2007 Income before taxes 525,000 Income Tax Expense Current 210,000 Deferred 48,000 258,000 Net Income 267,000 E19-7 (Terminology, Relationships, Computations, Entries) Instructions Complete the following statements by filling in the blanks. (a) In a period in which a taxable temporary difference reverses, the reversal will cause taxable income to be greater than (less than, greater than) pretax financial income.greater than) pretax financial income....
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This note was uploaded on 04/17/2011 for the course ACCOUNTING 490 taught by Professor Santos during the Spring '11 term at University of Phoenix.

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Week 4 - E19-3 (One Temporary Difference, Future Taxable...

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