Question

Krasco Inc.'s auditors prepared the following reconciliation between book and taxable income. The corporation has a 34% tax rate.Book income before tax $8,288,900Net permanent differences (35,770)Net temporary differences 112,400Taxable income $8,365,5301. Compute Krasco's tax expense per books and tax payable.2. Compute Krasco's net increase in deferred tax assets or deferred tax liabilities (identify which) for the year.

Answer 1

Answer:

income tax expense         2,806,064.2 debit

deferred income tax (benefit) 38,216 debit

   income tax payable                          2,844,820.2   credit

Explanation:,

income before taxes                  8,288,900

permanent difference                    (35,770)

accounting taxable income:       8,253,130

temporary difference                     112,400

taxable income                          8,365,530

income tax expense:

will be calculate considering the accounting income:

8,253,130 x 34% =  2,806,064.2

income tax payable:

will be calcualte considering the temporary difference:

8,365,530 x 34% = 2,844,820.2

the difference will be deferred income tax

2,844,820.2 - 2,806,064.2 = 38,216