Question

The following information is available for Crane Corporation for 2016 (its first year of operations). 1. Excess of tax depreciation over book depreciation, $43,800. This $43,800 difference will reverse equally over the years 2017–2020. 2. Deferral, for book purposes, of $18,600 of rent received in advance. The rent will be recognized in 2017. 3. Pretax financial income, $272,800. 4. Tax rate for all years, 40%.

Compute taxable income for 2016. Taxable income $ SHOW LIST OF ACCOUNTS

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2016. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit SHOW LIST OF ACCOUNTS

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2017, assuming taxable income of $348,000. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit

Answer 1

Answer
a
Pretax financial income for 2016	$      272,800
Excess of tax depreciation over book depreciation	-$       43,800
Rent received in advance	$        18,600
Taxable income for 2016	$      247,600
b
Account Titles and Explanation	Debit	Credit
Income Tax Expense	$      109,120
Deferred Tax Asset	$          7,440		18600*40%
Income Tax Payable		$   99,040	247600*40%
Deferred Tax Liability		$   17,520	43800*40%
c
Account Titles and Explanation	Debit	Credit
Income Tax Expense	$      142,260
Deferred Tax Liability	$          4,380		(43800/4)*40%
Income Tax Payable		$ 139,200	348000*40%
Deferred Tax Asset		$     7,440	18600*40%
( To record income tax exp)

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