Question

The following information is available for Riverbed Corporation for 2019 (its first year of operations).

1.		Excess of tax depreciation over book depreciation, $36,800. This $36,800 difference will reverse equally over the years 2020–2023.
2.		Deferral, for book purposes, of $18,300 of rent received in advance. The rent will be recognized in 2020.
3.		Pretax financial income, $320,500.
4.		Tax rate for all years, 20%.

(a) Compute taxable income for 2019.

(b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2019. (Credit account titles are automatically indented when 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.)

(c) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020, assuming taxable income of $299,000. (Credit account titles are automatically indented when 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.)

Answer 1

a
Pretax financial income	320500
Less: Excess of tax depreciation	-36800
Add: Rent received in advance	18300
Taxable income for 2019	302000
b
Account titles and Explanation	Debit	Credit
Income tax expense	64100
Deferred Tax Asset	3660		=18300*20%
Deferred Tax Liability		7360	=36800*20%
Income tax payable		60400	=302000*20%
c
Account titles and Explanation	Debit	Credit
Income tax expense	61620
Deferred Tax Liability	1840		=7360/4
Deferred Tax Asset		3660
Income tax payable		59800	=299000*20%