Question

Flint Corporation has one temporary difference at the end of 2017 that will reverse and cause taxable amounts of $57,500 in 2018, $62,100 in 2019, and $66,600 in 2020. Flint’s pretax financial income for 2017 is $314,600, and the tax rate is 40% for all years. There are no deferred taxes at the beginning of 2017.

(A) Compute Taxable Income and Income Taxes Payable for 2017.

Taxable income $__________

Income Taxes Payable $________

(B) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2017. (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 0 for the amounts.)

Account Titles and Explanation	Debit	Credit

(c) Prepare the income tax expense section of the income statement for 2017, beginning with the line “Income before income taxes.”. (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

	Flint Corporation
	Income Statement (Partial)
????		$
???
???	$
???	$
		$
???		$

Answer 1

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Part a:
Pretax Financial Income for 2017			$ 314,600
Less: Temporary Differences causing taxable amont in future
Year 2018		$ -57,500
Year 2019		$ -62,100
Year 2020		$ -66,600	$-186,200
Taxable Income for Year 2017			$ 128,400
Income Tax payable	128400*40%		$    51,360
Part b:
Account	Debit	Credit
Income Tax Expense (Plug in)	$      125,840
Income Tax Payable (128400*40%)		$ 51,360
Deferred Tax Liability (186200*40%)		$ 74,480
(being income tax recorded-current and deferred)
Part c:
Income before Income Taxes			$ 314,600
Less: Income Tax Expenses
Current Tax		$ -51,360
Deferred Tax		$ -74,480
			$-125,840
Net Income			$ 188,760