At the end of 2018, Smith Corporation had no book-tax differences and no deferred income tax assets or deferred income tax liabilities.

During the year 2019, two book-tax differences occurred. One was a $10,000 permanent difference that caused taxable income to be larger than financial income. The other was a $110,000 temporary difference that caused taxable income to be smaller than financial income. That $110,000 temporary difference will reverse over the years 2020 and 2021, causing future taxable amounts of $40,000 and $70,000 in 2020 and 2021, respectively.

Smiths pretax financial income for 2019 was $260,000. Smiths tax rate in 2019 is 35%, but starting in 2020 the tax rate will fall to 26%.

(a.) Prepare schedule that reconciles pretax financial income to taxable income for 2019

(b.)Compute the amount of income tax payable (current income tax expense) for 2019.

(c.) Compute the amounts of any deferred income tax assets and/or deferred income tax liabilities as of the end of 2019.

(d.)Compute the amount of Smiths income tax expense for 2019.

(e.) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2019.

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Smith Corporation Income Tax Calculations for 2019 a Reconciliation of Pretax Financial Income to Ta... View the full answer