The attached differences enter into the reconciliation of financial accounting i

Question

The attached differences enter into the reconciliation of financial accounting income and taxable income of a company for the year ending December 31, 20X1, its first year of operations. The enacted income tax rate is 30% for all years. REQUIRED: (1) Prepare a schedule of future taxable and deductible amounts (2) Prepare a schedule of the deferred tax asset and liability (3) Since this is the first year of operations, there is no beginning deferred tax asset or liability. Compute the net deferred tax expense or benefit. Prepare the general journal entry, in proper form, to record income tax expense, deferred taxes, and the income taxes payable for 20X1. Omit explanation (4)

Explanation / Answer

1 &2. Schedule of Future Taxable and deductible amount and Deffered Tax Asset & Liability Account Adjustement for Taxable Income Tax Basis Temporary Difference Future Taxable Amount Future Deductible Amount Excess Tax On depreciation -$240,000.00 -$240,000.00 -$240,000.00 Litigation Accrual $35,000.00 $35,000.00 $35,000.00 Unearned rent deferred on the books $25,000.00 $25,000.00 $25,000.00 Interest income from New York Muncipal bond -$10,000.00 -$10,000.00 Total -$240,000.00 $60,000.00 Deffered Tax Asset (30 % Tax) $18,000.00 Deffered Tax Liability (30 % Tax) $72,000.00 3. Computation of Net Deferred Tax expense and benefit Particular Amount Tax Depreciation exceded by book Depreciation -$240,000 Litigation Accrual $35,000 Unearned rent deferred on the books $25,000 Interest income from New York Muncipal bond 0 Timing Difference -$180,000 Deferred Tax Expense will be ( $180000*30%) -$54,000.00 4.. Journal Entry ($ in Million) Date Account Desription , Title Debit Credit 31/12/20X1 Tax Expense $132,000 Deffered Tax Expense $54,000 Income Tax Payable ($260000*30%) $78,000 To Record Income Tax Expense & DTL Created

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