Question

The following facts relate to Coronado Corporation.
1. Deferred tax liability, January 1, 2020, $20,200.
2. Deferred tax asset, January 1, 2020, $0.
3. Taxable income for 2020, $95,950.
4. Pretax financial income for 2020, $202,000.
5. Cumulative temporary difference at December 31, 2020, giving rise to future taxable amounts, $242,400.
6. Cumulative temporary difference at December 31, 2020, giving rise to future deductible amounts, $35,350.
7. Tax rate for all years, 20%.
8. The company is expected to operate profitably in the future.
Compute income taxes payable for 2020:
Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020. (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.)
Prepare the income tax expense section of the income statement for 2020, beginning with the line "Income before income taxes." (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Answer 1

Answer: See explanation

Explanation:

a. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020.

Debit Income Tax Expense $40400

Debit Defered Tax Asset $7070

Credit Income Tax Payable $19190

Credit Defered tax liability $28280

(To record income tax expense and defered tax/liability).

Note that:

Income Tax Expense was gotten as:

= $202,000 × 20%

= $202000 × 0.2

= $40,4000

Income Tax Payable was gotten as:

= $95,950 × 20%

= $95950 × 0.2

= $19,190

2. Prepare the income tax expense section of the income statement for 2020.

Income statement for year ended 31 December 2020

Income before tax = $202000

Less: Income Tax expense - Current = $19190

Less: Income Tax expense - Defered = $21210

Net income = $161600