E19-1. (One Temporary Difference, Future Taxable Amounts, One Rate, No Beginning Deferred Taxes) 2 5 South…
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Question “E19-1. (One Temporary Difference, Future Taxable Amounts, One Rate, No Beginning Deferred Taxes) 2 5 South…”
Answer
The amount of a mandatory monetary charge or other levy imposed by the government on someone liable to it to finance various government expenditures and welfare programs is called tax. The government’s main source of revenue is tax. The income statement includes both income tax as well as deferred tax.
Income tax expense refers to tax on income earned by an individual or entity that is subject to tax. The income earned by an assessor will affect the income tax. The income tax rate increases with an increase in income. Taxpayers can also take deductions to calculate income.
Deferred income tax can be described as a virtual asset, or liability, that is created to reflect the differences in income and tax calculations according to assesses books and taxation laws in its jurisdiction. Deferred taxes are calculated using the temporary timing differences that can be reversed in subsequent time periods.
These terms can be used to understand the concepts of income tax or deferred tax.
* Taxable income: This is the income from which an individual or company’s income tax will be calculated according to government tax laws.
* Accounting Income: This is the income that a company calculates from its accounting records.
* Temporary Differences: These are the differences between taxable income (book income) and taxable income (taxable income). They are caused by certain income or expenses that are recognized in one period to calculate taxable income, but in another period in books to calculate accounting income.
* Permanent differences: These are differences that are recognised in the books, but not allowed by taxation laws. They are items of income or expense that are excluded from the calculation of taxable income.
Temporary differences can result in deferred taxes. Permanent differences cannot be used for the calculation of deferred taxes due to their inability to reverse in subsequent time periods.
Temporary differences are subtracted from accounting income in order to calculate taxable income. Temporary differences include methods for charging depreciation and the quantum of deduction allowed to taxpayers, among others.
Calculate taxable income for 2014 and the income taxes due:
[Part a]
Part of
Part of
Calculate the deferred tax liability by following:
To record the income tax expense, deferred tax income taxes, and the income tax due for 2014, please use the following journal entry:
[Part b]
Part B
Part B
As follows:
[Part c]
Part C
Part C
Ans: Part A
For 2014, the taxable income and income taxes are $120,000 and $36,000, respectively.
Part b
To record the income tax expense, deferred tax income taxes and the income tax due for 2014, please use the following journal entry:
Part c
According to the income statement, 2014’s net income is $210,000
Conclusion
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