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Chapter 19: Question 3BE (page 1093)

Using the information from BE19-2, assume this is the only difference between Oxford鈥檚 pretax financial income and taxable income. Prepare the journal entry to record the income tax expense, deferred income taxes, and income taxes payable, and show how the deferred tax liability will be classified on the December 31, 2017, balance sheet.

Short Answer

Expert verified

Income taxis the amount oftax levied on the total earned incomeof anindividual or a firm. The total tax amount ispayable to the government,further used foreconomic development.

Step by step solution

01

Computation of income tax payable, deferred tax liability, and income tax expense for 2017

IncomeTaxpayable=(Pretaxfinancialincome-ExcessDepreciation)脳TaxRate=($225,000-$40,000)脳30%=$185,000脳30%=$55,500

role="math" localid="1648202959036" DeferredTaxLiability=ExcessDepreciation脳TaxRate=$40,000脳30%=$12,000

IncomeTaxexpense=Incometaxespayable+Deferredtaxliability=$55,500+$12,000=$67,500

02

Journal entries

Oxford Corporation
Journal Entry

Date

Particulars

Debit

Credit

2017

Income tax expense

$67,500

Deferred tax liability

$12,000

Income tax payable

$55,500

(To record the income tax expense)

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Most popular questions from this chapter

Button Company has the following two temporary differences between its income tax expense and income taxes payable2017 2018 2019 Pretax financial income \(840,000 \)910,000 \(945,000 Excess depreciation expense on tax return (30,000) (40,000) (10,000) Excess warranty expense in financial income 20,000 10,000 8,000 Taxable income \)830,000 \(880,000 \)943,000 The income tax rate for all years is 40%. Instructions (a) Assuming there were no temporary differences prior to 2017, prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2017, 2018, and 2019. (b) Indicate how deferred taxes will be reported on the 2019 balance sheet. Button鈥檚 product warranty is for 12 months. (c) Prepare the income tax expense section of the income statement for 2019, beginning with the line 鈥淧retax financial income.鈥�

This year, Gumowski Company has each of the following items in its income statement. 1. Gross profits on installment sales. 2. Revenues on long-term construction contracts. 3. Estimated costs of product warranty contracts. 4. Premiums on officers鈥� life insurance policies with Gumowski as beneficiary. Instructions (a) Indicate where deferred income taxes are reported in the financial statements.

At December 31, 2017, Percheron Inc. had a deferred tax asset of \(30,000. At December 31, 2018, the deferred tax asset is \)59,000. The corporation鈥檚 2018 current tax expense is $61,000. What amount should Percheron report as total 2018 income tax expense?

Describe the procedure(s) involved in classifying deferred tax amounts on the statement of financial position under IFRS.

Youngman Corporation has temporary differences at December 31, 2017, that result in the following deferred taxes.

Deferred tax asset $24,000

Deferred tax liability 69,000

Indicate how these balances would be presented in Youngman鈥檚 December 31, 2017, statement of financial position.
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