Question

Problem 19-1 (Part Level Submission) The following information is available for Whispering Corporation for 2017. 1. Depreciation reported on the tax return exceeded depreciation reported on the income statement by $124,000. This difference will reverse in equal amounts of $31,000 over the years 2018-2021. 2. Interest received on municipal bonds was $9,900 3. Rent collected in advance on January 1, 2017, totaled $55,500 for a 3-year period. Of this amount, $37,000 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 $298,000 are due per the tax return for 2017 6. No deferred taxes existed at the beginning of 2017. (a) Your answer is correct Compute taxable income for 2017 Taxable income for 2017 745000

Answer 1

Working Note
Particulars	Amount
Income Tax Payable for 2017	$298,000.00
Tax rate for 2017	40%
Taxable Income (288000/40%)	$745,000.00
Add: Difference due to Depreciation	$124,000.00
Add: Interest on Muncipal bonds	$9,900.00
Less: Unearned rent	($37,000.00)
Pre tax financial income	$841,900.00

Journal Entries - Mhispering Corporation
Date	Particulars	Debit	Credit
31-Dec-17	Income tax expense (BF)	$367,210.00
	Deferred tax assets(37000*35%)	$12,950.00
	Income tax Payable ($841900*40%)		$336,760.00
	Deferred tax liability ($124,000*35%)		$43,400.00
	To Record Income tax expense for 2017
31-Dec-18	Income tax expense	$315,175.00
	Deferred tax liability ($31000*35%)	$10,850.00
	Income tax Payable(913000*35%)		$319,550.00
	Deferred tax Assets($18500*35%)		$6,475.00
	To Record Income tax expense for 2018

Income Statement (Partial)
For year ended December 31, 2017
Particulars		Amount
Income before taxes		$841,900.00
Less: Income tax expense:
Current Tax	$336,760.00
Income tax expense - Deferred tax liability	$43,400.00
Income tax benefit - Deferred tax Assets	($12,950.00)	$367,210.00
Net Income		$474,690.00