Colt Company reports pretax financial income of $143,000 in 2016. In addition to pretax income from continuing operations (of which revenues are $295,000), the following items are included in this pretax income:

Loss from disposal of Division B	(10,000)
Income from operations of discontinued Division B	16,000
Prior period adjustment	(8,000)

Colts taxable income totals $93,000 in 2016. The difference between the pretax financial income and the taxable income is due to the excess of tax depreciation over financial depreciation on assets used in continuing operations.

At the beginning of 2016, Colt had a retained earnings balance of $310,000 and a deferred tax liability of $8,100. During 2016, Colt declared and paid dividends of $48,000. It is subject to tax rates of 15% on the first $50,000 of income and 30% on income in excess of $50,000. Based on proper interperiod tax allocation procedures, Colt has determined that its 2016 ending deferred tax liability is $23,100.

Required:

1.	Prepare a schedule for Colt to allocate the total 2016 income tax expense to the various components of pretax income.
2.	Prepare Colts income tax journal entry at the end of 2016.
3.	Prepare Colts 2016 income statement.
4.	Prepare Colts 2016 statement of retained earnings.
5.	Show the related income tax disclosures on Colts December 31, 2016, balance sheet.

CHART OF ACCOUNTS

Colt Company

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Equipment
198	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Revenue
260	Deferred Tax Liability
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue
423	Income from Operations of Discontinued Division

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
892	Loss from Disposal
910	Income Tax Expense

Prepare Colts income tax journal entry on December 31, 2016.

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6

Labels
Current Assets
Current Liabilities
Noncurrent Liabilities
Noncurrent Assets
Results of discontinued operations
Amount Descriptions
Adjusted retained earnings, January 1, 2016
Cash dividends
Expenses
Income from continuing operations
Net income
Prior period adjustment
Pretax income from continuing operations
Retained earnings, December 31, 2016
Revenues
Retained earnings, January 1, 2016

Prepare a schedule for Colt to allocate the total 2016 income tax expense to the various components of pretax income. Additional Instruction

COLT COMPANY

Schedule of Income Tax Expense

For Year Ended December 31, 2016

1	Component (Pretax)	Income Pretax Amount	Tax Rate	Income Tax Expense
2	Income from continuing operations		0.15
3	Income from continuing operations		0.30
4	Loss from disposal of Division B		0.30
5	Income from operations of discontinued Division B		0.30
6	Prior period adjustment		0.30
7

Prepare Colts 2016 income statement. Additional Instructions

COLT COMPANY

Income Statement

For Year Ended December 31, 2016

1
2
3
4
5
6
7
8
9
10

Prepare Colts 2016 statement of retained earnings. Additional Instructions

COLT COMPANY

Statement of Retained Earnings

For Year Ended December 31, 2016

1
2
3
4
5
6
7

Show the related income tax disclosures on Colts December 31, 2016, balance sheet. Additional Instructions

COLT COMPANY

Partial Balance Sheet

December 31, 2016

1
2
3
4