Question

Exercise 19-2 The following information is available for Whispering Corporation for 2016 (its first year of operations). 1. Excess of tax depreciation over book depreciation, $38,000. This $38,000 difference will reverse equally over the years 2017-2020. 2. Deferral, for book purposes, of $19,800 of rent received in advance. The rent will be recognized in 2017. 3. Pretax financial income, $276,800. 4. Tax rate for all years, 30%. Compute taxable income for 2016. Taxable incomes

Answer 1

1
Pretax financial income	276800
Less: Excess Depreciation	-38000
Add: Rent deferral	19800
Taxable income	258600
2
	Debit	Credit
Income Tax expense	83040
Deferred Tax asset	5940		=19800*30%
Income Tax payable		77580	=258600*30%
Deferred Tax Liability		11400	=38000*30%
3
	Debit	Credit
Income Tax expense	107670
Deferred Tax Liability	2850		=11400/4
Income Tax payable		104580	=348600*30%
Deferred Tax asset		5940	=19800*30%