Exercise 19-16

During 2017, Indigo Co.s first year of operations, the company reports pretax financial income at $258,100. Indigos enacted tax rate is 45% for 2017 and 40% for all later years. Indigo expects to have taxable income in each of the next 5 years. The effects on future tax returns of temporary differences existing at December 31, 2017, are summarized as follows.

		Future Years
		2018			2019			2020		2021		2022		Total
Future taxable (deductible) amounts:
Installment sales		$29,800			$29,800			$29,800						$89,400
Depreciation		5,800			5,800			5,800		$5,800		$5,800		29,000
Unearned rent		(45,600	)		(45,600	)								(91,200	)

Complete the schedule below to compute deferred taxes at December 31, 2017.

								Deferred Tax
Temporary Difference		Future Taxable (Deductible) Amounts			Tax Rate			(Asset)		Liability
Installment sales		$89,400				%		$		$
Depreciation		29,000				%		$		$
Unearned rent		(91,200	)			%		$
Totals		$						$		$

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Compute taxable income for 2017.

Taxable income for 2017

$

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Prepare the journal entry to record income taxes payable, deferred taxes, and income tax expense 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

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