Question

Yount Inc.'s auditors prepared the following reconciliation between book and taxable income. Yount's tax rate is 21 percent. Net income before tax Permanent book/tax differences Temporary book/tax differences Taxable income $ 378, 200 (33,500) 112,400 $ 457,100 a. Compute Yount's tax expense for financial statement purposes. b. Compute Yount's tax payable. C. Compute the net increase in Yount's deferred tax assets or deferred tax liabilities (identify which) for the year.

Answer 1

Explaination: Income Before Tax Permanent Diffrence Accounting Taxable Income Temporary Diffrence Taxable Income Amount 378200 -33500 344700 112400 457100

A) Income Tax Expenses: It will be Calculated using Accounting Income : 344700 x 21% = 72387 B) Income Tax Payble : It will be calculated using the temporary difference : 457100 x 21% = 95991 C) Net Increase in Deferred Tax Assets or Liabilities : 95991 72387 23604

Debit Particulars Income Tax Expense Deferred Income Tax(Benefit) To Income Tax Payable ... Dr ...Dr Credit 72387 0 23604 0 95991

Note : The Tax Rate has been given 21%