Question

2.92/4 Question 13 View Policies Show Attempt History You are viewing Attempt7 Blue Company reports preta financial income of $64,000 for 2020. The following items cause taxable income to be different than pretax financial income. 1. Depreciation on the tax return is greater than depreciation on the income statement by $14,700 2. Rent collected on the tax return is greater than rent recognized on the income statement by $22,100. 3. Fines for pollution appear as an expense of $10,000 on the income statement. Blue's tax rate is 30% for all years, and the company expects to report taxable income in all future years. There are no deferred taxes at the beginning of 2020

Answer 1

Computing Deferred Tax
	$
Depreciation as per tax return is higher than financial income	14,700
(Depreciation is higher for tax means Deferred Tax Liability shall be creasted)
Tax Rate @ 30 %	4,410
Deferred Tax Liability	4,410
Computing Current Tax
	$
Financial Income (As per Accounts Book)	64,000
Additional Depreciation deduction	-14,700
Higher rent taxable in tax return	22,100
Fines as not allowed as expenses in tax return	10,000
Taxable Income as per return	81,400
Tax Payable @ 30%	24,420
Blue Company
Income Statement (Partly)
For the year ended December 31st, 2020
		$
Income before Income Tax		64,000
Income Tax Expenses
Current	24,420
Deferred	4,410	28,830
Net Income (Loss)		35,170	-
Note :
As journal Entry passed by you have doubt. As already informed that there is no any opening
deferred tax assets or liability.
Alternate Entry
Income Tax Expenses A/c………………………….Dr.	28,830
To Current Tax Payable A/c		24,420
To Deferred Tax Payable A/c		4,410