Question

At December 31, 2014, the records of Pearson Corporation provided the following information:
Additional information is as follows:
a. Revenues include $ 20,000 interest on tax- free municipal bonds.
b. Depreciation expense relates to equipment acquired on January 1, 2014, at a cost of $ 44,000, with no salvage value and an estimated useful life of four years.
c. The accelerated depreciation (capital cost allowance) used on the tax return is as follows: 2014, $ 17,600; 2015, $ 13,200; 2016, $ 8,800; and 2017, $ 4,400.
d. The company is subject to an income tax rate of 30 percent. Assume that 85 percent of the income tax liability is paid in the year incurred.
e. The income tax return for 2014 shows a taxable income of $ 32,400.
Required:
1. Compute the income taxes payable and the deferred income tax for 2014. Is the deferred income tax a liability or an asset? Explain.
2. Prepare the journal entry to record income taxes for 2014.
3. Show how the tax- related amounts should be reported on the statement of earnings for 2014 and the statement of financial position at December 31, 2014.


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  • CreatedAugust 04, 2015
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