Reference no: EM1375487
1. Fairfax Company had a balance in Deferred Tax Liability of $840 on 31st December, 2014, resulting from depreciation timing differences. Differences in tax and accounting depreciation for assets purchased on 1st January, 2014, are as given:
Financial Tax
Year Depreciation Depreciation
2014 $ 4,000 $ 6,800
2015 4,000 5,200
2016 4,000 2,400
2017 4,000 1,600
$16,000 $16,000
In addition to 2014 depreciation timing difference, Fairfax Company expensed $2,000 of warranty costs that can be deducted for tax purposes when paid in prospect years. Fairfax's taxable income in 2014 was $35,000. The 2014 income tax rate was 35 percent, and no changes in the tax rate for future years have been enacted.
Required: Create the income tax journal entry for Fairfax Company for 31st December, 2014.
2.Thorn Corporation has deductible and taxable temporary differences. At the starting of 2014, its deferred tax asset was $12,000, and its deferred tax liability was $17,500. The company expects it's future deductible amounts to be "deductible" in 2015 and its future taxable amount to be "taxable in 2016. In 2013, Congress enacted revised tax rates for future years as given: 2014, 30 percent, 2015, 32 percent, and 2016, 35 percent. At the end of 2014 Thorn had income taxes payable of $23,500, and increase in deferred tax liability of $3,000, and an ending balance in its deferred tax asset of $13,300.
Item Amount
a. Taxable income for 2014
b. Future taxable amount, 12/31/2014
c. Increase in future deductible amount during 2014
d. Income tax expense for 2014
Required:
Assist Thorn in completing schedule by filling in blanks for items related to its income taxes for 2014.