1. Riverbed Company’s current income taxes payable related to its taxable income
ID: 341215 • Letter: 1
Question
1. Riverbed Company’s current income taxes payable related to its taxable income for 2017 is $417,000. In addition, Riverbed’s deferred tax asset decreased $15,000 during 2017. What is Riverbed’s income tax expense for 2017?
Income tax expense for 2017 $
2.Ayayai Co. has one temporary difference at the beginning of 2017 of $469,000. The deferred tax liability established for this amount is $140,700, based on a tax rate of 30%. The temporary difference will provide the following taxable amounts: $80,000 in 2018, $195,000 in 2019, and $194,000 in 2020. If a new tax rate for 2020 of 20% is enacted into law at the end of 2017, what is the journal entry necessary in 2017 (if any) to adjust deferred taxes? (Credit account titles are automatically indented when the 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
3.Ayayai Corporation has a cumulative temporary difference related to depreciation of $576,000 at December 31, 2017. This difference will reverse as follows: 2018, $43,000; 2019, $258,000; and 2020, $275,000. Enacted tax rates are 37% for 2018 and 2019, and 43% for 2020.
Compute the amount Ayayai should report as a deferred tax liability at December 31, 2017.
Account Titles and Explanation
Debit
Credit
Explanation / Answer
1.
Current tax expense = current income tax obligation + closing deferred tax liability – opening deferred tax liability – (closing deferred tax asset – opening deferred tax asset)
Here there has been a decline in deferred tax asset to the tune of $15,000. Hence, as per the above equation, this amount will be added to the current income tax obligation.
Thus income tax expense for 2017 = 417,000+15,000
= $432,000
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