Question

The records of Calib Corporation provided the following summarized data for 2014 and 2015:
a. Calib is subject to an income tax rate of 35 percent. Assume that 80 percent of the income taxes payable are paid in the current year and 20 percent on February 28 of the next year.
b. The temporary differences resulted from the following:
i. The 2015 expenses include an amount of $ 8,000 that must be deducted only in the 2014 tax return.
ii. The 2015 revenues include an amount of $ 6,000 that was taxable only in 2016.
c. The taxable income shown in the tax returns was $ 72,000 for 2014 and $ 87,000 for 2015.
Required:
1. For each year, compute (a) the income taxes payable and (b) the deferred income taxes. Identify whether the deferred income tax amounts are assets or liabilities. Explain.
2. Prepare the journal entry for each year to record income taxes payable, deferred income taxes, and income tax expense.
3. Show the tax- related amounts that should be reported each year on the statement of earnings and the statement of financial position.
4. As a financial analyst, would you evaluate differently a deferred income tax liability compared with income taxes currently payable?


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  • CreatedAugust 04, 2015
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