Question

Charleston, Inc., an accrual basis C corporation, reports pretax book income of $820,000. At the beginning of the tax year, Charleston reported no deferred tax accounts on its balance sheet. It is subject to a 21% U.S. income tax rate in the current year and for the foreseeable future.

Charleston's book-tax differences include the following.

Addition to the book reserve for uncollectible receivables     (no specific write-offs occurred; therefore, a zero income tax deduction) $255,000 Tax depreciation in excess of book 160,000 Book gain from installment sale of nonbusiness asset,     deferred for tax 127,000 Interest income from Memphis muni wastewater bonds 11,600

Compute the entity's current income tax payable and deferred tax liability for the year.

Current income tax payable: $ 163,044

Deferred tax liability: ?

Answer 1

Current income tax payable = [820000 + 255000 - 160000 - 127000 - 11600 ] *0.21 = 163044

Deferred tax liability = [(820000 - 11600 ) *0.21] - 163044 = 6720