Allied Corporation has one temporary difference at the end of

Allied Corporation has one temporary difference at the end of 2014 that will reverse and cause deductible amounts of $40,000 in 2015, and $70,000 in 2016. Allied’s pretax financial income for 2014 is $125,000, and the tax rate is 40% for all years. There are no deferred taxes at the beginning of 2014.


Instructions

(a) Compute taxable income and income taxes payable for 2014.

(b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2014.

(c) Prepare the income tax expense section of the income statement for 2014, beginning with the line “Income before income taxes.”


Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...