Exercise 19-20

The differences between the book basis and tax basis of the assets and liabilities of Headland Corporation at the end of 2019 are presented below.

		Book Basis		Tax Basis
Accounts receivable		$47,500		$-0-
Litigation liability		29,800		-0-

It is estimated that the litigation liability will be settled in 2020. The difference in accounts receivable will result in taxable amounts of $29,800 in 2020 and $17,700 in 2021. The company has taxable income of $381,000 in 2019 and is expected to have taxable income in each of the following 2 years. Its enacted tax rate is 34% for all years. This is the companys first year of operations. The operating cycle of the business is 2 years.

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2019. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit

Indicate how deferred income taxes will be reported on the balance sheet at the end of 2019.

Headland Corporation Balance Sheet December 31, 2019For the Year Ended December 31, 2019For the Quarter Ended December 31, 2019
Other AssetsNoncurrent LiabilitiesTotal Property, Plant and EquipmentTotal Current LiabilitiesTotal Current AssetsTotal Intangible AssetsTotal LiabilitiesTotal Long-term InvestmentsTotal Liabilities and Stockholders' EquityLong-term InvestmentsProperty, Plant and EquipmentTotal Long-term LiabilitiesTotal Stockholders' EquityIntangible AssetsCurrent AssetsStockholders' EquityNon-current AssetsTotal AssetsCurrent Liabilities
					$