South Carolina Corporation has one temporary difference at the end of 2014 that

Question

South Carolina Corporation has one temporary difference at the end of 2014 that will reverse and cause taxable amounts of $56,970 in 2015, $62,180 in 2016, and $67,947 in 2017. South Carolina’s pretax financial income for 2014 is $345,760, and the tax rate is 30% for all years. There are no deferred taxes at the beginning of 2014.

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South Carolina Corporation
Income Statement (Partial)
Year ended December 31, 2014

South Carolina Corporation has one temporary difference at the end of 2014 that will reverse and cause taxable amounts of $56,970 in 2015, $62,180 in 2016, and $67,947 in 2017. South Carolina’s pretax financial income for 2014 is $345,760, and the tax rate is 30% for all years. There are no deferred taxes at the beginning of 2014.

Explanation / Answer

Ans 1 a Pre-Tax Financial Income 3,45,760.00 Temperary Difference 2015      56,970.00 2016      62,180.00 2017      67,947.00 1,87,097.00 Taxable income=Pre-Tax Financial Income-Temperary Difference 1,58,663.00 Tax Payable@ 30%      47,598.90 Tax Proof Pre-Tax Financial Income 3,45,760.00 Tax on above 1,03,728.00 Temporray Difference 1,87,097.00 Defrred Tax @ 30%      56,129.10 Taxable Income 1,58,663.00 Current Tax Payable      47,598.90 Total Tax 1,03,728.00 Ans 1 b Account Titles and Explanation Debit Credit Income Tax Expense 1,03,728.00 Income Tax Payable 47,598.90 Deferred Tax Payable 56,129.10 Ans 2 Income Before Income Taxes 3,45,760.00 Less Income Tax expense-Current    -47,598.90 Less Income Tax expense-Deferred    -56,129.10 Net Income(Loss) 2,42,032.00

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