The accounting records of Rhyme Redwood Corporation provide income statement data for 2012.
Total revenue . . . . . . $ 940,000
Total expenses . . . . . . . 750,000
Income before tax . . . $ 190,000
Total expenses include depreciation of $50,000 computed on the straight-line method. In calculating taxable income on the tax return, Rhyme Redwood uses the modified accelerated cost recovery system (MACRS). MACRS depreciation was $80,000 for 2012. The corporate income tax rate is 34%.
Requirements
1. Compute taxable income for the year. For this computation, substitute MACRS depreciation in place of straight-line depreciation.
2. Journalize the corporation’s income tax for 2012.
3. Show how to report the two income tax liabilities on Rhyme’s classified balance sheet.