Question

The following information is available for Skysong Corporation for 2017.

1.		Depreciation reported on the tax return exceeded depreciation reported on the income statement by $122,000. This difference will reverse in equal amounts of $30,500 over the years 2018–2021.
2.		Interest received on municipal bonds was $10,000.
3.		Rent collected in advance on January 1, 2017, totaled $63,900 for a 3-year period. Of this amount, $42,600 was reported as unearned at December 31, 2017, for book purposes.
4.		The tax rates are 40% for 2017 and 35% for 2018 and subsequent years.
5.		Income taxes of $296,000 are due per the tax return for 2017.
6.		No deferred taxes existed at the beginning of 2017.

C) Prepare the journal entries to record income tax expense, deferred income taxes, and income taxes payable for 2017 and 2018. Assume taxable income was $1,062,000 in 2018.

D) Prepare the income tax expense section of the income statement for 2017, beginning with "Income before income taxes."

Answer 1

Refer the below images for the above asked questions in a detailed way of solution.
Solution the journal entries prepare deferred relord to tai expense income and income tax es income payable was $ 1062 000 for taxes 2017 4 2018. income Assome taxa ble in 2018. Parlicolars DY. Amaunt Amant Income 2017 $ 323790 $14910 tax er pense Ale Dr Deferred Tax Asset AlC Dr To intome taxes paya ble AlC { २१6००० TO Deferred tax lia bi kty Ale $ 42700 working:- Income tax cxpense : $ 296000 +$ 42700 -$149IO =$323490 Deterred tax ASset " $42600 Unearned income 351. tay rate $14910 %3D Income tax payable : tares due for 2017- $296 o00 Given Given Tax Yate - 4o1. (or) •40 Taxable income for a017 $ 296000 %3D =$ 740000 . Snrome Tar payable = $7400004 •40 296000

Deferred tax liabitity : $ 122000 extess depreciation x 351 tax rate = 122000 X •3 $ 42700 parti colars or. Amount Cr. Amoont 2018 Income Ale Dr Tax expense $368480 $ 10675 Deferred Tax lkabiliry AlL D To intome Taxes payable Ale- $ 371700 $ 7455 Deferred iax Asset alc TO working ;- Income Tar expense: $ 371700 t $ 7455-$10675= $368 480 O Deterred Tax liability २२००० X 35. Tax rati 4 years S1 22000 X •35 = $10675 Income Tax payable : Garable income $1062000 X •3S (Tax ratc) =$1062000 * •35 $ 371700

Deferred Tax Asset : $43600 unearned intome X 35-1 (ax rate) 2 years - 42600 X •35 $7455 income prepare the income the tax expense Section of Statement for 2017, beginning with before income Tares s Intome Particolars Amount Income before intome taxes $ 329400 (working:) In lome tax expense: १२१6००० $27790 C4 4200 - 14910] Current Deferred $ 323790 $ 505 610 Net income -> working: computation 0f income before income taxes Taxable income $296000 $ 740000 •40 Excess deprecia tion Govermental interest unearned rent $ ।२२००० 10 000 -$ (42600) pretax financal income for aQ017 $829400