Question

Southern Atlantic Distributors began operations in January 2018 and purchased a delivery truck for $80,000. Southern Atlantic plans to use straight-line depreciation over a four-year expected useful life for financial reporting purposes. For tax purposes, the deduction is 50% of cost in 2018, 30% in 2019, and 20% in 2020. Pretax accounting income for 2018 was $440,000, which includes interest revenue of $45,000 from municipal bonds. The enacted tax rate is 40%. Assuming no differences between accounting income and taxable income other than those described above: Required: 1. Complete the following table given below and prepare the journal entry to record income taxes in 2018. 2. What is Southern Atlantic's 2018 net income? Complete this question by entering your answers in the tabs below. Required 1 Calculation Required 1 GJ Required 2 Complete the following table given below to record income taxes in 2018. (Enter your answ deducted should be indicated with a minus sign.) Tax Rate % Tax $ Recorded Pretax accounting income Permanent difference Income subject to taxation Temporary difference Income taxable in current year $ 440 (45,000) (44,560) x (20,000) x $ (64,560) x 40% 40% 40% = = Income tax expi (8,000) Deferred tax lial Income tax pay < Required 1 Calculation Required 1 GJ >

REQURED 2:

PREPARE JOURNAL ENTRY TO RECORD INCOME TAX IN 2018

REQUIRED 3:

WHAT IS NET INCOME?

Answer 1

Answer: 1 Comp Income taxes in 2018 Following table given and prepare Journal enting particulars Amount Tax Rate Tax Recorded as pre tax accounting $440000 Income permanente diffe veugl'$ 45,000 Income subject to $395.000 40% $158,000 Income tax expenses taxation Temporary difference $11.950 40%. $4,500 loeferred tar Liabilile [$45000/4 years? Income taxable incurrent $383,750 40% $153,500 Income tax payable Journal entry Date particulars A Debit credit Income tax expenses Ale or $ 158,000 To Deferred tax liability $ 4,500 TO Income tax payable $153,500 2) Calculation of Southern Atlantic's 2018 Net Income. pasticedays Amount pre tax Income $ 440,000 Lese-Income tase expenses -$ 158,000 Net Income $282,000