WK 4 LTupload - (LO3,5,6,)

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(LO 3,5,6,) (One Temporary Difference, Tracked for 4 Years, One Permanent Difference, Change in Rate) The pretax financial income of Parker-Gregory Company differs from its taxable income throughout each of 4 years as follows. Pretax Taxable Year  Financial Income Income Tax Rate 2007  $280,000.00   $180,000.00  35% 2008  $320,000.00   $225,000.00  40% 2009  $350,000.00   $270,000.00  40% 2010  $420,000.00   $580,000.00  40% Pretax financial income for each year includes a nondeductible expense of $30,000 (never deductible for tax purposes). The remainder of the difference between pretax financial income and taxable income in each period is due to one depreciation temporary difference. No deferred income taxes existed at the beginning of 2007. Instructions (a) Prepare journal entries to record income taxes in all 4 years. Assume that the change in the tax rate to 40% was not enacted until the beginning of 2008. 2007 2008 2009 2010 Pretax Financial Income  $280,000.00   $320,000.00   $350,000.00   $420,000.00  Nondeductible Income 30,000 30,000 30,000 30,000      Subtotal  310,000.00   350,000.00   380,000.00   450,000.00  Taxable income  180,000.00   225,000.00   270,000.00   580,000.00   $130,000.00   $125,000.00   $110,000.00   $(130,000.00)  Temp differ at year end  2007 2008 2009 2010 Temp. different at year end  $130,000.00   $255,000.00   $365,000.00   $235,000.00  Year 2007 Year 2009 Taxable income 2007  $180,000.00  Taxable income for 2009  $270,000.00  Enacted tax rate for 2007 35% Enacted tax rate 40% Income Tax Payable (current)  $63,000.00  Income Tax payable (current) 2009  $108,000.00  Future deductible amount  $130,000.00  Future deductible amount  $365,000.00  Tax Rate 35% Tax Rate 40% Deferred tax expense for 2007  $45,500.00  Deferred tax expense for 2009  $146,000.00  Deferred tax liability 2007  $45,500.00  Defrred tax liability at year end 2009  $146,000.00  Deferred tax liability at beg of 2007 0 Deferred tax liability at the beginning of 2009  $102,000.00  Deferred tax expense for 2007  $45,500.00  Deffered tax expense for 2009  $44,000.00  Defferred tax expense for 2009  $44,000.00  Deferred Tax Expense for 2007  $45,500.00  Current tax expense for 2009  $108,000.00  Current tax expense for 2007  63,000  Income tax expense for 2009 
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WK 4 LTupload - (LO3,5,6,)

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