AC 302 CHAPTER 19 Question 3

AC 302 CHAPTER 19 Question 3
																											
	Name				Date																							
	Instructor				Course																							
	Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield																											
	Primer on Using Excel in Accounting by Rex A Schildhouse																											
																												
	E19-3 (One Temporary Difference, Future Taxable Amounts, One Rate, Beginning Deferred 																											
	Taxes) Brennan Corporation began 2012 with a				$90,000 	balance in the Deferred Tax 																						
	Liability account. At the end of 2012, the related cumulative temporary difference amounts to																											
	$350,000 	and it will reverse evenly over the next 2 years. Pretax accounting income for 2012 is 																										
	$525,000 	, the tax rate for all years is			40%	, and taxable income for 2012																						
	is	$400,000 																										
																												
	Instructions:																											
	(a) Compute income taxes payable for 2012.																											
																												
		Taxable income for 2012			Amount																							
		Enacted tax rate			Percentage																							
		Income tax payable for 2012			Formula																							
																												
	"(b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes
     payable for 2012."																											
																												
																												
	Future Years			2013	2014	Total																						
	Future taxable (deductible) amounts			Amount	Amount	Formula																						
	Tax Rate			Percentage	Percentage																							
	Deferred tax liability (asset)			Formula	Formula	Formula																						
																												
		Deferred tax liability at the end of 2012				Amount																						
		Title				Amount																						
		Title				Formula																						
																												
		Title				Formula																						
		Title				Formula																						
																												
		Account Title			Amount																							
		Account Title				Amount																						
		Account Title				Amount																						
																												
	"(c) Prepare the income tax expense section of the income statement for 2012, beginning with the line
     ""Income before income taxes."""																											
																												
																												
		Income before income taxes				Amount																						
		Income tax expense																										
		Title			Formula																							
		Title			Formula	Formula																						
		Title				Formula																						
																												
	Note to instructor: Because of the flat tax rate for all years, the amount of cumulative temporary difference existing at the beginning of the year can be calculated by dividing $90,000 by 40%, which equals $225,000. The difference between the $225,000 cumulative temporary difference at the beginning of 2012 and the $350,000 cumulative temporary difference at the end of 2012 represents the net amount of temporary difference originating during 2012 (which is $125,000). With this information, we can reconcile pretax financial income with taxable income as follows:																											
																												
																												
																												
																												
																												
																												
		Pretax financial income			Amount																							
		Title			Amount																							
																												
		Title			Formula