Question

The following facts relate to Duncan Corporation. 

1. Deferred tax liability, January 1, 2020, $30,000.

2. Deferred tax asset, January 1, 2020, $10,000.

3. Taxable income for 2020, $105,000.

4. Cumulative temporary difference at December 31, 2020, giving rise to future taxable amounts, $230,000.

5. Cumulative temporary difference at December 31, 2020, giving rise to future deductible amounts, $95,000.

6. Tax rate for all years, 20%. No permanent differences exist.

7. The company is expected to operate profitably in the future. 

Compute the amount of pretax financial income for 2020. Pretax financial income

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020. (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 o for the amounts.) 

Prepare the income tax expense section of the income statement for 2020, beginning with the line "Income before income taxes." (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) 

Answer 1

Answoro 200 0 Temporary differences for current year giving rise to future faccable amount (230,000 Xe61) --30,000/2001 (45,000-30,000 7 201 16,000/2004 = 80,000 Temporary differenes for corrent year giving rise to future deductible amount = 45,000 x 20:1)=10,000 -(19,000-10,000)/2017 = 9,000/2011 45,000 = Pretax financial incom Income = $105,000 +80,000–45,000 = $140,000 3.pre-fax financial income = $10,000

☺ 2 Journal Entries Account Title Ei Explanation Debit (1) credid (6) income tax sspense $28,000 $9,000 Deferred fax assets Income fare payable cospoox201) Deferred tax liability $a 1,000 $16,000 3 income sofatimedia Duncan Corporation Income statement partial) income before income fared $140,000 Less i income fax Expense: Curat $2,000 Organid (15.000-9.000] 167.000 * 28,000 net income / Class) $112.000