At the end of 2019, Wasicsko AG has €180,000 of cumulative temporary differences that will result in reporting future taxable amounts as follows.
2020.........................€ 70,000
2021...........................50,000
2022...........................40,000
2023...........................20,000
..............................€180,000
Tax rates enacted as of the beginning of 2018 are:
2018 and 2019.........................40%
2020 and 2021.........................30%
2022 and later..........................25%
Wasicsko's taxable income for 2019 is €340,000. Taxable income is expected in all future years.
Instructions
a. Prepare the journal entry for Wasicsko to record income taxes payable, deferred income taxes, and income tax expense for 2019, assuming that there were no deferred taxes at the end of 2018.
b. Prepare the journal entry for Wasicsko to record income taxes payable, deferred income taxes, and income tax expense for 2019, assuming that there was a balance of €22,000 in a Deferred Tax Liability account at the end of 2018.