Question

CALCULATOR FULL SCREEN PRINTER VERSION NEXT Question 9 The following information is available for Grouper Corporation for 2017 1. Depreciation reported on the tax return exceeded depreciation reported on the income statement by $110,000. This difference will reverse in equal amounts of $27,500 over the years 2018-2021. 2. Interest received on municipal bonds was $10,400. 3. Rent collected in advance on January 1, 2017, totaled $65,100 for a 3-year period. Of this amount, $43,400 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 $344,000 are due per the tax return for 2017. 6. No deferred taxes existed at the beginning of 2017. Compute taxable income for 2017. Taxable income for 2017 Compute pretax financial income for 2017 Pretax financial income for 2017 wat for 2017 and 2018. Assume taxable income was $1,041,000 in 2018.

Answer 1

Working Note Particulars Incoe Tax Payable for 2017 Tax rate for 2017 Taxable Income (344000/40%) Add: Difference due to Depreciation Add: Interest on Muncipal bonds Less: Unearned rent Pre tax financial income Amount $344,000.00 40% $860,000.00 $110,000.00 $10,400.00 ($43,400.00) $937,000.00 Credit Journal Entries - Metlock Corporation Date Particulars Debit 31-Dec-17 Income tax expense (BF) $355,310.00 Deferred tax assets(43400*35%) $15,190.00 Income tax Payable ($830000*40%) Deferred tax liability ($110,000*35%) To Record Income tax expense for 2017 $332,000.00 $38,500.00 $362,320.00 $9,625.00 31-Dec-18 Income tax expense Deferred tax liability ($27,500*35%) Income tax Payable(1041000*35%) Deferred tax Assets($21700*35%) To Record Income tax expense for 2018 $364,350.00 $7,595.00 Metlock Corporation Income Statement (Partial) For year ended December 31, 2017 Particulars Amount Income before taxes $937,000.00 Less: Income tax expense: Current Tax $332,000.00 Income tax expense - Deferred tax liability $38,500.00 Income tax benefit - Deferred tax Assets ($15,190.00) $355,310.00 Net Income $581,690.00