Question

Exercise 19-5 The following facts relate to Larkspur Corporation 1. Deferred tax liability, January 1, 2017, $42,000. 2. Deferred tax asset, January 1, 2017, $0. 3. Taxable income for 2017, $99,750 4. Pretax financial income for 2017, $210,000. 5. Cumulative temporary difference at December 31, 2017, giving rise to future taxable amounts, $252,000. 6. Cumulative temporary difference at December 31, 2017, giving rise to future deductible amounts, $36,750. 7. Tax rate for all years, 40 % . 8. The company is expected to operate profitably in the future. Compute income taxes payable for 2017. (Round answer to the nearest dollar amount, e.g. $1,525.) Income taxes payable SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2017. (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. Round answers to the nearest dollar amount, e.g. $1,525.) Debit Account Titles and Explanation Credit Income Tax Expense Deferred Tax Asset Income Tax Payable Deferred Tax Liability SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT

Answer 1

1
Taxable income	99750
X Tax rate	40%
Income taxes payable	39900
2
Account Titles and Explanation	Debit	Credit
Income tax expense	84000
Deferred tax asset	14700		=36750*40%
Income tax payable		39900
Deferred tax liability		58800	=(252000*40%)-42000
3
Income statement
For the year ended December 31, 2017
Income before income taxes		210000
Income tax expense
Current	39900
Deferred	44100
		84000
Net income/(loss)		126000