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 2016 through 2019 except for differences in depreciation on an operational asset. The asset cost $160,000 and is depreciated for income tax purposes in the following amounts 2016 $52,800 2017 70,400 2018 24,000 2019 12,800 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. 2019 Accounting income before taxes and depreciation $90,000 $110.000 S100,000 S100,000 Assume the average and marginal income tax rate for 2016 and 2017 was 30%, however. during 2017 tax legislation was passed to raise thetarrate to40%beginning in 2018. The 40% rate remained in effect through the years 2018 and 2019. Both the accounting and income tax periods end December 31 - Required: Prepare the journal entries to record ncome texes for the years 2016 through 2019. (If no entry is required for e transection event, select No journat entry required" in the firat account field.) View transaction list Journal entry worksheet

Explanation / Answer

Year Books Depre-books Book-tax Taxation depre-Taxation Taxation- tax Deferred tax assets 2016 90000 40000 15000 90000 52800 11160 -3840 2017 110000 40000 21000 110000 70400 11880 -9120 2018 100000 40000 24000 100000 24000 30400 6400 2019 100000 40000 24000 100000 12800 34880 10880 4320 Journal Entries: Date Accounts Titles Debit $ Credit $ Dec 31 2016 Tax expenses 15000 Deferred tax liability 3840 Tax payable 11160 Dec 31 2017 Tax expenses 21000 Deferred tax liability 9120 Tax payable 11880 Dec 31 2018 Tax expenses 24000 Deferred tax liability 6400 Tax payable 30400 Dec 31 2019 Tax expenses 24000 Deferred tax liability 6560 Deferred tax assets 4320 Tax payable 34880

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