Question

Deferred Tax Calculations (Appendix)

Wyhowski Inc. reported income from operations, before taxes, for 2015-2017 as follows:

2015	$433,000
2016	495,000
2017	580,000

When calculating income, Wyhowski deducted depreciation on plant equipment. The equipment was purchased January 1, 2015, at a cost of $180,000. The equipment is expected to last three years and have a(n) $15,000 salvage value. Wyhowski uses straight-line depreciation for book purposes. For tax purposes, depreciation on the equipment is $103,000 in 2015, $41,000 in 2016, and $21,000 in 2017. Wyhowski's tax rate is 35%.

Required:

Enter all amounts as positive numbers.

1. How much did Wyhowski pay in income tax each year? If required, round all calculations to the nearest dollar.

Year	Taxes Paid
2015	$
2016	$
2017	$

2. How much income tax expense did Wyhowski record each year?

Year	Income Tax Expense
2015	$
2016	$
2017	$

3. What is the balance in the Deferred Income Tax account at the end of 2015, 2016, and 2017? If your answer is zero, enter "0". If required, round all calculations to the nearest dollar.

Year	Balance	Debit or Credit
2015	$
2016	$
2017	$

Answer 1

1. How much did Wyhowski pay in income tax each year? If required, round all calculations to the nearest dollar.
2015	Income before taxes	$ 433,000.00
	Less: Excess of tax depreciation over book depreciation ($103,000 – $55,000*)	$   48,000.00
	Taxable income	$ 385,000.00
	Tax paid or payable (35%)	$ 134,750.00
	*($180,000 – $15,000)/3 years = $55,000
2016	Income before taxes	$ 495,000.00
	Add : Excess of book depreciation over tax depreciation ($55,000 – $41,000*)	$   14,000.00
	Taxable income	$ 509,000.00
	Tax paid or payable (35%)	$ 178,150.00
	*($180,000 – $15,000)/3 years = $55,000
2017	Income before taxes	$ 580,000.00
	Add : Excess of book depreciation over tax depreciation ($55,000 – $21,000*)	$   34,000.00
	Taxable income	$ 614,000.00
	Tax paid or payable (35%)	$ 214,900.00
	*($180,000 – $15,000)/3 years = $55,000
Year	Taxes Paid
2015	$                                  134,750.00
2016	$                                  178,150.00
2017	$                                  214,900.00
2. How much income tax expense did Wyhowski record each year?
Year	Taxable Income	Income Tax Expense @ 35%
2015	$                                  433,000.00	$ 151,550.00
2016	$                                  495,000.00	$ 173,250.00
2017	$                                  580,000.00	$ 203,000.00
3. What is the balance in the Deferred Income Tax account at the end of 2015, 2016, and 2017? If your answer is zero, enter "0". If required, round all calculations to the nearest dollar.
Year	Balance	Debit or Credit
2015	$                                    16,800.00	Credit
2016	$                                    11,900.00	Credit
2017	$                                                -
Year	Income Tax Expense ( 1)	Income Tax Payable (2)	(1) - (2)	Deferred Tax Account	Debit or Credit
2015	$                                  151,550.00	$ 134,750.00	$         16,800.00	$ 16,800.00	Credit
2016	$                                  173,250.00	$ 178,150.00	$         (4,900.00)	$ 11,900.00	Credit
2017	$                                  203,000.00	$ 214,900.00	$       (11,900.00)	$              -	)