Exercise 19-1 Sandhill Corporation has one temporary difference at the end of 20

ID: 2408160 • Letter: E

Question

Exercise 19-1 Sandhill Corporation has one temporary difference at the end of 2017 that will reverse and cause taxable amounts of $50,600 in 2018, $55,500 in 2019, and $60,400 in 2020. Sandhill's pretax financial income for 2017 is $287,000, and the tax rate is 30% for all years. There are no deferred taxes at the beginning of 2017 Compute taxable income and income taxes payable for 2017 Taxable income Income taxes payable s Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2017. (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 Prepare the income tax expense section of the income statement for 2017, beginning with the line "Income before income taxes.". (Enter loss using either a negative sign preceding the number e.g.-45 or parentheses e.g.(45). Sandhill Corporation Income Statement (Partial)

Explanation / Answer

Answers

Temporary Differences to be reversed

in 2018

$ 50,600.00

in 2019

$ 55,500.00

in 2020

$ 60,400.00

Total temporary difference for 2017

$ 1,66,500.00

Pre Tax financial Income

$ 2,87,000.00

Total temporary difference for 2017

$ (1,66,500.00)

Taxable Income for 2017

$ 1,20,500.00 [Answer]

Income tax rate

30%

Income Tax payable

$ 36,150.00 [Answer: 120500 x 30%]

Total temporary difference for 2017

$ 1,66,500.00

Income tax rate

30%

Deferred Tax Liabilities to be created

$ 49,950.00

Account Titles & Explanation

Debit

Credit

Income tax Expenses

$ 86,100.00

Deferred Tax liabilities

$ 49,950.00

Income Tax payable

$ 36,150.00

(income tax expense and deferred income taxes recorded0

For the period ended 31 Dec 2017

Net Income before Income taxes

$ 2,87,000.00

Less: Income Taxes:

Current Tax

$ 36,150.00

Deferred Tax Expense

$ 49,950.00

$ 86,100.00

Net Income after Income taxes

$ 2,00,900.00