Problem 19-1 The following information is available for Nash Corporation for 201
ID: 2398935 • Letter: P
Question
Problem 19-1 The following information is available for Nash Corporation for 2017. 1. Depreciation reported on the tax return exceeded depreciation reported on the income statement by $122,000. This difference will reverse in equal amounts of $30,500 over the years 2018-2021 2. Interest received on municipal bonds was $11,000. 3. Rent collected in advance on January 1, 2017, totaled $63,900 for a 3-year period. Of this amount, $42,600 was reported as unearned at December 31, 2017, for book purposes. 4. The tax rates are 40% for 2017 and 35% for 2018 and subsequent years. 5. Income taxes of $331,000 are due per the tax return for 2017 6. No deferred taxes existed at the beginning of 2017 Compute taxable income for 2017 Taxable income for 2017 Compute pretax financial income for 2017. Pretax financial income for 2017 917,90o Prepare the journal entries to record income tax expense, deferred income taxes, and income taxes payable for 2017 and 2018. Assume taxable income was $932,000 in 2018. (CreditExplanation / Answer
1 Taxable Income for 2017 Income Tax Payable $331,000 Tax Rate 40% Taxable Income = Income Tax Payable/Tax Rate = $331400/40% $ 827,500.00 2 Pretax Financial Income for 2017 Taxable Income for 2017 $ 827,500.00 Add: Excess depreciation 122000 Add: Intt. On Muncipal Bonds 11000 Unearned Rent -42600 PRE TAX FINANCIAL INOME $ 917,900.00 3 JE 2017 Income Tax Expense $356,660 Deferred Tax Asset [42600*40%] $17,040 Income Tax Payable $331,000 deffered Tax Liability [$122000*.35] $ 42,700.00 2018 Income Tax Expense $322,980 deffered Tax Liability [$122000/4*.35] $ 10,675.00 Income Tax Payable [932000*.35] $326,200 Deferred Tax Asset [42600/2*35%] $ 7,455.00 4 EXTRACT OF P&L ACCOUNT FOR 2017 Profit Before Taxes 917,900 Less: Income Tax Expense Current $331,000 Deferred 25300 356,300 [$42700-17040] Profit after tax 561,600