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2020. Tom Juli Dec. 31, Part II: Bill Inc. began business on Jan. 1, 2017. Its pretax financial income for the first 2 years was
2020. Tom Juli Dec. 31, Part II: Bill Inc. began business on Jan. 1, 2017. Its pretax financial income for the first 2 years was as follows: 2017 $620,000 2018 715,000 The following items caused the only differences between pretax financial income and taxable income. 1. In Jan. 1, 2017, the company pays at once $27,000 of 3 years rent through 2019 for a leased warehouse. 2. The company pays, for environmental problems, $22,000 fine in 2017 and $18,000 fine in 2018. 3. In 2018, the company terminated a top executive and agreed to $600,000 of severance pay. The amount will be paid $200,000 per year for 2018-2020. The 2018 payment was made. The $600,000 was expensed in 2018. For tax purposes, the severance pay is deductible as it is paid. The enacted tax rates existing at December 31, 2017 are: 2017 35% 2019 20% 2018 20% 2020 20% INSTRUCTIONS: (a) Determine taxable income for 2017 and 2018. (b) Prepare the journal entry to record income taxes for 2017 and 2018. (c) Prepare the income tax expense section of the income statement for the year ended December 31, 2017 & 2018. (d) Show how the deferred income taxes should be reported on the balance sheet at Dec 31, 2018
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