Exercise 19-10

The following facts relate to Windsor Corporation.

1.		Deferred tax liability, January 1, 2017, $61,200.
2.		Deferred tax asset, January 1, 2017, $20,400.
3.		Taxable income for 2017, $107,100.
4.		Cumulative temporary difference at December 31, 2017, giving rise to future taxable amounts, $234,600.
5.		Cumulative temporary difference at December 31, 2017, giving rise to future deductible amounts, $96,900.
6.		Tax rate for all years, 40%. No permanent differences exist.
7.		The company is expected to operate profitably in the future.

(A) Compute the amount of pretax financial income for 2017.

Pretax financial income $___________________

(B) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2017. (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

Allowance to Reduce Deferred Tax Asset to Expected Realizable Value Benefit Due to Loss Carryback Benefit Due to Loss Carryforward Deferred Tax Asset Deferred Tax Liability Income Tax Expense Income Tax Payable Income Tax Refund Receivable No Entry

(C) Prepare the income tax expense section of the income statement for 2017, beginning with the line Income before income taxes. (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

	Windsor Corporation
	Income Statement Partial
????		$
?????
?????	$
???	$
		$
?????		$

Account Titles for Income Statement

Current, Deferred, Dividends, Expenses, Income before taxes, Income tax expense, Net Income/Loss,

Retained Earnings January 1, Retained Earnings December 31, Revenues, Total Expenses, Total Revenues

(D) Compute the effective tax rate for 2017. (Round answer to 0 decimal places, e.g. 25%)

The Effective TAx Rate ____________%