Question

The information that follows pertains to Esther Food Products: At December 31, 2018, temporary differences were associated with the following future taxable (deductible) amounts: Depreciation $ 70,000 Prepaid expenses 30,000 Warranty expenses (12,000 ) b. No temporary differences existed at the beginning of 2018. c. Pretax accounting income was $115,000 and taxable income was $27,000 for the year ended December 31, 2018. d. The tax rate is 45%. Required: Complete the following table given below and prepare the appropriate journal entry to record income taxes for 2018. x Tax Rate = Tax $ Recorded as: Pretax accounting income $ 112,000 Permanent differences x =Income subject to taxation x =Temporary Differences x =Income taxable in current year x =Record 2021 income tax

Answer 1

Answer:

..............

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Answer 2

Answer:

1. Income taxable in current year $27,000.00 45% $12,150 Income Tax Payable

2. 31-Dec-18

Income tax expense Dr $17,250

Deferred tax assets Dr $12,150

Cr To Income taxes payable $12,150

Cr To Deferred tax liability $17,250

Explanation:

1. Computation of the given table to record income taxes for 2018

Particulars Amount Rate of Tax Tax Recorded as

Pretax accounting income $115,000.00

Permanent difference $0.00

Income subject to taxation

$115,000.00 45% $17,250 Income tax expense

TEMPORARY DIFFERENCE:

Depreciation -$70,000.00 45% -$31,500 Deferred tax liability

Prepaid Expenses -$30,000.00 45% -$13,500 Deferred tax liability

Warranty expense $27,000.00 45% $12,150 Deferred tax assets

Income taxable in current year $27,000.00 45% $12,150 Income Tax Payable

2. Preparation of the appropriate journal entry to record income taxes for 2018.

31-Dec-18

Income tax expense Dr $17,250

Deferred tax assets Dr $12,150

Cr To Income taxes payable $12,150

Cr To Deferred tax liability $17,250

(To record income tax expense)