Answer:Please refer to the explanation section
Explanation:
The question is incomplete the Table that the first question refers to is not provided in the question, However having dealt with such questions in the past, I will assume the first question requires us to calculate differed tax and Process a journal entry.
1. Differed Tax arises as a result of temporary differences between accounting principles and Tax Laws. Southern Atlantic Distributors plans to depreciate the delivery truck over a period of 4 years while The receiver of tax revenue (Tax authority) plans to deduct 50% in the first year 2018, 30% in the second year 2019 and 20% third year.
Tax base = Book value of the asset based on Tax laws Deduction Policies
Carrying Value = Book Value of an asset based on accounting policies
Tax Base 2018. 50% is deducted in the first year. Therefore
Tax Base 2018 = $40 000 x 50/100 = $20000
Tax Base 2018 (Book value using tax laws) = $20 000 (40 000 - 20000)
Carrying Value = $40 000 - $40000/4 = $40 000 - $10000 = $30000
Differed tax Liability = $20000 - $30000 = -$10 000 x 30/100 = -$3000
Journal Entry
Dr Income Tax Expense $3000
Cr Differed Tax Liability $3000
2. Southern Atlantic net income
Pretax income = $280 000
Income = $280 000 x 30/100 = $84000
Total Income tax for 2018 = $84000 + $3000 = $87000
Net income = $280 000 - $87000 = $193000
