Cheyenne Inc. has two temporary differences at the end of 2016. The first differ

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Cheyenne Inc. has two temporary differences at the end of 2016. The first difference stems from installment sales, and the second one results from the accrual of a loss contingency. Cheyenne's accounting department has developed a schedule of future taxable and deductible amounts related to these temporary differences as follows. 2017 2018 2019 2020 Taxable amounts $42,600 $45,400 $56,300$75,600 Deductible amounts (14,700) (20,400) $42,600 $30,700 $35,900 $75,600 As of the beginning of 2016, the enacted tax rate is 34% for 2016 and 2017, and 38% for 2018-2021. At the beginning of 2016, the company had no deferred income taxes on its balance sheet. Taxable income for 2016 is $542,000. Taxable income is expected in all future years. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2016. (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

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Solution:

Computation of Deferred tax Liabilities and Deferred tax assets Particulars 2017 2018 2019 2020 Total Temporary difference giving rise to future taxable amount $42,600.00 $45,400.00 $56,300.00 $75,600.00 Enacted tax rate 34% 38% 38% 38% Deferred tax liability $14,484.00 $17,252.00 $21,394.00 $28,728.00 $81,858.00 Temporary difference giving rise to future deductible amount $14,700.00 $20,400.00 Deferred tax assets $5,586.00 $7,752.00 $13,338.00

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