Zekany Corporation would have had identical income before taxes on both its inco

Question

Zekany Corporation would have had identical income before taxes on both its income tax returns and income statements for the years 2018 through 2021 except for differences in depreciation on an operational asset. The asset cost $220,000 and is depreciated for income tax purposes in the following amounts 2018 2019 2020 2021 $72, 600 96,800 33,000 17,600 The operational asset has a four-year life and no residual value. The straight-line method is used for financial reporting purposes Income amounts before depreciation expense and income taxes for each of the four years were as follows 2018 2019 2020 2021 Accounting income bef re taxes and depreciation $120,000 $140,000 $130,000 $130,000 Assume the average and marginal income tax rate for 2018 and 2019 was 30%; however, during 2019 tax legislation was passed to raise the tax rate to 40% beginning in 2020. The 40% rate remained in effect through the years 2020 and 2021. Both the accounting and income tax periods end December 31 Required Prepare the journal entries to record income taxes for the years 2018 through 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Explanation / Answer

Journal Entry Date Particulars Dr. Amt. Cr. Amt. 2016 Income Tax Expense                        Dr.      19,500    To Deferred Tax Liability         5,280    To Income Tax Payable      14,220 2017 Income Tax Expense                        Dr.      25,440 $19,500+ $5,940    To Deferred Tax Liability      12,480    To Income Tax Payable      12,960 2018 Income Tax Expense                        Dr.      30,000 Deferred Tax Liability                      Dr.         8,800    To Income Tax Payable      38,800 2021 Income Tax Expense                        Dr.      30,000 Deferred Tax Liability                      Dr.      14,960    To Income Tax Payable      44,960 2018 2019 2020 2021 Accounting Income Before Taxes & Dep.              120,000          140,000          130,000          130,000 Dep as per Straight Line Method             55,000         55,000         55,000         55,000 Accounting Income Before Taxes                65,000            85,000            75,000            75,000 Tax Rate 30% 30% 40% 40% Income Tax Expense                19,500            25,500            30,000            30,000 Accounting Income Before Taxes & Dep.              120,000          140,000          130,000          130,000 Dep. As per I Tax             72,600         96,800         33,000         17,600 Income as per I TAXAct - before Taxes                47,400            43,200            97,000          112,400 Tax Rate 30% 30% 40% 40% Income Tax Payable                14,220            12,960            38,800            44,960                  5,280            12,540            (8,800)          (14,960) Dep Exp. Diffrence              (17,600)          (41,800)            22,000            37,400 Tax Diffrence                (1,760)            (4,180) Extra Tax to be paid            (5,940)

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