Prepare the journal entries to record income tax expense

Reference no: EM13599155

1. Depreciation reported on the tax return exceeded depreciation reported on the income statement by $120,000. This difference will reverse in equal amounts of $30,000 over the years 2013-2016.

2. Interest received on municipal bonds was $10,000.

3. Rent collected in advance on January 1, 2012, totaled $60,000 for a 3-year period. Of this amount, $40,000 was reported as unearned at December 31, 2012, for book purposes.

4. The tax rates are 40% for 2012 and 35% for 2013 and subsequent years.

5. Income taxes of $320,000 are due per the tax return for 2012.

6. No deferred taxes existed at the beginning of 2012.

Instructions:
(a) Compute taxable income for 2012.
(b) Compute pretax financial income for 2012.
(c) Prepare the journal entries to record income tax expense, deferred income taxes, and income taxes payable for 2012 and 2013. Assume taxable income was $980,000 in 2013.
(d) Prepare the income tax expense section of the income statement for 2012, beginning with "Income before income taxes."

Reference no: EM13599155

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