Accounting for Income Taxes

The following accounting information pertains to Hallmark Company (all amounts are in $):

2018

Revenues 100,000 Income 120,000

Wages 40,000 Wages 40,000

Accrued Wages 8,000

Other Expenses 22,000 Other Deductions 22,000

2019

Revenues 160,000 Income 140,000

Wages 42,000 Wages 50,000

Accrued Wages 10,000

Other Expenses 40,000 Other Deductions 40,000

2020

Revenues 170,000 Income 200,000

Wages 50,000 Wages 60,000

Accrued Wages 15,000

Accrued Legal 30,000

Other Expenses 40,000 Other Deductions 40,000

Additional Information:

1. On January 1, 2018, Hallmark bought new software for $30,000. It has a three-year useful life with no salvage value. Book depreciation is a straight line and Tax depreciation is: Yr1: $15,000, Yr2: $10,000 and Yr3: $5,000.
2. The Income Tax Rate for all years is 30% for both Book and Tax.
3. Book follows US GAAP and Tax follows the Cash Basis.

Requirements:

1. Prepare a depreciation schedule for Book and Tax depreciation
2. Outline the Income Statement and Income Tax Return for each year side by side.
3. Record Income Tax Expense for each year.
4. Show the history of each sub-ledger account.