Question

Brief Exercise 107 Pole Co. at the end of 2018, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income $480,000 Extra depreciation taken for tax purposes (1,056,000) Estimated expenses deductible for taxes when paid 950,000 Taxable income $374,000 Use of the depreciable assets will result in taxable amounts of $352,000 in each of the next three years. The estimated litigation expenses of $950,000 will be deductible in 2021 when settlement is expected.

$OKbJvqDZJ7hp6v7EO23lVESk15rhtzzXaL_lF7SZ$

Prepare a schedule of future taxable and deductible amounts. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) 2019 2020 2021 Total Future taxable (deductible) amounts Extra depreciation $ $lPGvNgIakZT98ILmwshBzuJpIXSFxsLPo_qMD782$ $ $XpLr8Fi-6giC_FE0-7XauYtLZ8thiiIn9EqnmZ60$ $ $nyMW1SehRnNn0gKPt0rtHNqjqoC_zUeiJYapBZQt$ $ Litigation $ufT5Zzs7JOklT0BScLXobSRzUuhJ-0-OL_gE2Uea$ $PeISVUjIGqFQEIHplayH6t1_-SpQU5LgDFdwNfwB$

$6tmOZXgAyV8qESeZwh2RvF_S5lA0fSZl4Upmt5PU$

Prepare the journal entry to record income tax expense, deferred taxes, and income taxes payable for 2018, assuming a tax rate of 35% for all years. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit $KSMq02GTkuyDkS3zj8K0bhV1XC_VE6yaORM8cf2Y$ $V_BMVbEou8E1i2haYGuz98SIf4uDxYJJWQRppgN3$ $5Q6mt2ZFRRE_WkOs4KUR1t8WsQQPg9-EwYo12icn$ $Nz3nNi57Rud_KmLVsh17FTsCd0saHsqX-xL8n5KE$ $cEI-ddlRP67_Lql9vGf8hAxJKJrml6pRyxhB8i95$

Answer 1

2019 2020 2021 Future taxable (deductible) amounts $352,000 $352,000 $352,000 $1,056,000 Extra depreciation Litigation ($950,000) ($950,000) Account Titles and Explanation Debit Credit Income Tax Expense ($130,900 + $369,600 - $332,500) $168,000 Deferred Tax Asset ($950,000 x 35%) $332,500 Deferred Tax Liability ($1,056,000 x 35%) $369,600 Income Taxes Payable ($374,000 x 35%) $130,900