The comparative statements of earnings of Martin Corporation for fiscal years 2014 and 2015 showed the following summarized pretax data:
The expenses in 2014 included an amount of $ 4,000 that was deductible for tax purposes in 2015. The average income tax rate was 32 percent. Taxable income from the income tax returns was $ 20,000 for 2014 and $ 16,000 for 2015.
1. For each year, compute (a) the income taxes payable and (b) the deferred income tax. Is the deferred income tax a liability or an asset? Explain.
2. Show what amounts related to income taxes should be reported each year on the statement of earnings and the statement of financial position. Assume that the income tax is paid on March 1 of the next year.
3. Explain why income tax expense is not simply the amount of cash paid during the year.

  • CreatedAugust 04, 2015
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