ch19_sol

# By rex a schildhouse taxes starfleet corporation has

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by Rex A Schildhouse Taxes) Starfleet Corporation has one temporary difference at the end of 2012 that will reverse and (a) Compute taxable income and income taxes payable for 2012. Temporary difference resulting in future taxable amounts in year: (b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2012. (c) Prepare the income tax expense section of the income statement for 2012, beginning with the line "Income before income taxes."

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63b2d62cb17dc30d8a404a4512332808c1ecc5bc.xlsx, Exercise 19-3 Solution, Page 3 of 8, 03/29/2012, 01:32:31 Name: Solution Date: Instructor: Course: E19-3 (One Temporary Difference, Future Taxable Amounts, One Rate, Beginning Deferred \$90,000 balance in the Deferred Tax Liability account. At the end of 2012, the related cumulative temporary difference amounts to \$350,000 and it will reverse evenly over the next 2 years. Pretax accounting income for 2012 is \$525,000 , the tax rate for all years is 40% , and taxable income for 2012 is \$400,000 Instructions: Taxable income for 2012 \$400,000 Enacted tax rate 40% Income tax payable for 2012 \$160,000 Future Years 2013 2014 Total Future taxable (deductible) amounts \$175,000 \$175,000 \$350,000 Tax Rate 40% 40% Deferred tax liability (asset) \$70,000 \$70,000 \$140,000 Deferred tax liability at the end of 2012 \$140,000 Deferred tax liability at the beginning of 2012 90,000 50,000 Current tax expense for 2012 160,000 Income tax expense for 2012 \$210,000 Income Tax Expense 210,000 Income Tax Payable 160,000 Deferred Tax Liability 50,000 Income before income taxes \$525,000 Income tax expense Current \$160,000 Deferred 50,000 210,000 Net income \$315,000 Pretax financial income \$525,000 (125,000) Taxable income \$400,000 Intermediate Accounting , 14 th Edition by Kieso, Weygandt, and Warfield Primer on Using Excel in Accounting by Rex A Schildhouse Taxes) Brennan Corporation began 2012 with a (a) Compute income taxes payable for 2012. (b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2012. Deferred tax expense for 2012 (increase required in deferred tax liability) (c) Prepare the income tax expense section of the income statement for 2012, beginning with the line "Income before income taxes." Note to instructor: Because of the flat tax rate for all years, the amount of cumulative temporary difference existing at the beginning of the year can be calculated by dividing \$90,000 by 40%, which equals \$225,000. The difference between the \$225,000 cumulative temporary difference at the beginning of 2012 and the \$350,000 cumulative temporary difference at the end of 2012 represents the net amount of temporary difference originating during 2012 (which is \$125,000). With this information, we can reconcile pretax financial income with taxable income as follows: Temporary difference originating giving rise to net future taxable amounts
63b2d62cb17dc30d8a404a4512332808c1ecc5bc.xlsx, Exercise 19-3, Page 4 of 8, 03/29/2012, 01:32:32 Name: Date: Instructor: Course: E19-3 (One Temporary Difference, Future Taxable Amounts, One Rate, Beginning Deferred \$90,000 balance in the Deferred Tax Liability account. At the end of 2012, the related cumulative temporary difference amounts to \$350,000 and it will reverse evenly over the next 2 years. Pretax accounting income for 2012 is \$525,000 , the tax rate for all years is 40%

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