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The pretax financial income of Oriole Company differs from its taxable income throughout each of 4...

The pretax financial income of Oriole Company differs from its taxable income throughout each of 4 years as follows.

Year

Pretax
Financial Income

Taxable Income

Tax Rate
2017 $285,000 $178,000 35 %
2018 318,000 234,000 40 %
2019 381,000 282,000 40 %
2020 402,000 593,000 40 %

Prepare the income statement for 2018, beginning with income before income taxes.
Pretax financial income for each year includes a nondeductible expense of $28,600 (never deductible for tax purposes). The remainder of the difference between pretax financial income and taxable income in each period is due to one depreciation temporary difference. No deferred income taxes existed at the beginning of 2017.

Prepare the income statement for 2018, beginning with income before income taxes.

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Answer #1

Oriole Company Income Statement for the year Ended 2018 and 2017 2018 2017 Income before Income tax $ 318,000 $ 285,000 Less: Tax expenses: Income tax Deferred tax 93,600 51,820 62,300 47,460 175,240 Income after tax $ 172,580 $ Calculation of income tax: Taxable income Tax rate Income tax 2018 234,000 40% 93,600 2017 178,000 35% 62,300Calculation of Deferred tax: Pre tax financial income Add: Non deductible expenses 2018 2017 318,000 28,600 346,600 234,000 112,600 285,000 28,600 313,600 178,000 135,600 Taxable income Temporary Difference Beginning balance of temporary difference Add: Addition Less: Deletion Ending balance of temporary difference Tax rate Ending Balance of deferred tax liability Less: Beginning balance of deferred tax Deferred tax liability created during the year 135,600 112,600 135,600 248,200 40% 9,280 47,460 51,820 135,600 35% 47,460 47,460

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