Question: E19-3 (One Temporary Difference, Future Taxable Amounts, One Rate, Beginning Deferred Taxes) Bandung Corporation began 2014 with a $92,000 balance in the Deferred Tax Liability

E19-3 (One Temporary Difference, Future Taxable Amounts, One Rate, Beginning Deferred Taxes) Bandung Corporation began 2014 with a $92,000 balance in the Deferred Tax Liability account. At the end of 2014, the related cumulative temporary difference amounts to $350,000 and it will reverse evenly over the next 2 years. Pretax accounting income for 2014 is $525,000 , the tax rate for all years is 40% , and taxable income for 2014 is $405,000 Instructions:

(a) Compute income taxes payable for 2014.
Taxable income for 2014 $405,000
Enacted tax rate 40%
Income tax payable for 2014 $162,000
(b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2014.
Future Years 2015 2016 Total
Future taxable (deductible) amounts Amount Amount Formula
Tax Rate Percentage Percentage
Deferred tax liability (asset) Formula Formula Formula
Deferred tax liability at the end of 2014 Amount
Title Amount
Title Formula
Title Formula
Title Formula
Account Title Amount
Account Title Amount
Account Title Amount
(c) Prepare the income tax expense section of the income statement for 2014, beginning with the line "Income before income taxes."
Income before income taxes $525,000
Income tax expense
current $162,000
deferred 48,000 210,000
net income $315,000

Note to instructor: Because of the flat tax rate for all years, the amount of cumulative temporary difference existing at the beginning of the year can be calculated by dividing $92,000 by 40%, which equals $230,000. The difference between the $230,000 cumulative temporary difference at the beginning of 2014 and the $350,000 cumulative temporary difference at the end of 2014 represents the net amount of temporary difference originating during 2014 (which is $120,000). With this information, we can reconcile pretax financial income with taxable income as follows:

Pretax financial income Amount
Title Amount
Title Formula

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

Q:

(One Temporary Difference, Future Taxable Amounts, One Rate, Beginning Deferred Taxes) Houston Corporation began 2014 with a $92,000 balance in the Deferred Tax Liability account. At the end of 2014,...

Q:

E19-3 (One Temporary Difference, Future Taxable Amounts, One Rate, Beginning Deferred Taxes) Bandung Corporation began 2007 with a $92,000 balance in the Deferred Tax Liability account. At the end of...

Q:

(L01,2) EXCEL (One Temporary Difference, Future Taxable Amounts, One Rate, Beginning Deferred Taxes) Bandung Corporation began 2017 with a $92,000 balance in the Deferred Tax Liability account. At...

Q:

(One Temporary Difference, Future Taxable Amounts, One Rate, Beginning Deferred Taxes) Brennan Corporation began 2010 with a $90,000 balance in the Deferred Tax Liability account. At the end of 2010,...

Q:

E18.3 (LO 1, 2) (One Temporary Difference, Future Taxable Amounts, One Rate, Beginning Deferred Taxes) Brennan Corporation began 2025 with a $90,000 balance in the Deferred Tax Liability account. At...

Q:

E19.3, (LO 1, 2) Excel (One Temporary Difference, Future Taxable Amounts, One Rate, beginning Deferred Taxes) Bandung Corporation began 2020 with a $46,000 balance in the Deferred Tax Liability...

Q:

E19-3 (LO1,2) One Temporary Difference, Future Taxable Amounts, One Rate, Beginning Deferred Taxes Bandung Corporation provided the following concerning its income taxes for 2020 Balance in Deferred...

Q:

E19.3 (LO 1, 2) Excel (One Temporary Difference, Puture Taxable Amounts, One Rate, Beginning Deferred Taxes) Bandung Corporation began 2020 with a $46,000 balance in the Deferred Tax Liability...

Q:

IUs 3 ( LO 1 , 2 ) Excel ( One Temporary Difference, Future Taxable Amounts, One Rate, Beginning Deferred Taxes ) Bandung Corporation began 2 0 2 5 with a $ 4 6 , 0 0 0 balance in the Deferred Tax...

Q:

E 1 8 . 3 ( LO 1 , 2 ) ( One Temporary Difference, Future Taxable Amounts, One Rate, Beginning Deferred Taxes ) Bandung Corporation began 2 0 2 5 with a $ 4 6 , 0 0 0 balance in the Deferred Tax...

Q:

Arkansas Sales Consultants completed the following transactions during the latter part of January: Jan. 22 Performed services for customers on account, $9,000. 30 Received cash on account from...

Q:

An unscrupulous creditor might sell the right to collect the same debt to two different persons by assigning it to each of them. Which one of the two innocent assignees is entitled to payment and...

Q:

Selling inventory for cash _ blank _ cash and _ blank _ retained earnings. Multiple choice question. increases; decreases incorrect increases; increases decreases; decreases decreases; increases

Q:

Scenario: A Multi-national Corporation called The Globe has created a subsidiary called Thirst in an under-developed country called non-potable waters. This hosting country suffers from a severe...

Q:

3. What are the current trends in computer hardware platforms?

Q:

1. What is IT infrastructure and what are the stages and drivers of IT infrastructure evolution?

Q:

4-14 What is the relationship of privacy to Facebooks business model? Over the course of less than a decade, Facebook has morphed from a small, niche networking site for mostly Ivy League college...