Question

Exercise 19-1 Headland Corporation has one temporary difference at the end of 2017 that will reverse and cause taxable amounts of $53,900 in 2018, $58,600 in 2019, and $63,900 in 2020. Headland's pretax financial income for 2017 is $304,500, and the tax rate is 40% for all years. There are no deferred taxes at the beginning of 2017 Compute taxable income and income taxes payable for 2017. Taxable income Income taxes payable $

Answer 1

1
Taxable income	128100		=304500-53900-58600-63900
X Tax rate	40%
Income taxes payable	51240
2
Account Titles and Explanation	Debit	Credit
Income tax expense	121800
Deferred tax liability		70560	=(53900+58600+63900)*40%
Income taxes payable		51240
3
Income statement
For the year ended December 31, 2017
Income before income taxes		304500
Income tax expense
Current	51240
Deferred	70560
		121800
Net income/(loss)		182700