Problem 19-8

The following information was disclosed during the audit of Elbert Inc.

1.		Year		Amount Due per Tax Return
		2014		$135,500
		2015		111,000

2.		On January 1, 2014, equipment costing $650,200 is purchased. For financial reporting purposes, the company uses straight-line depreciation over a 5-year life. For tax purposes, the company uses the elective straight-line method over a 5-year life. (Hint: For tax purposes, the half-year convention as discussed in Appendix 11A must be used.)
3.		In January 2015, $227,400 is collected in advance rental of a building for a 3-year period. The entire $227,400 is reported as taxable income in 2015, but $151,600 of the $227,400 is reported as unearned revenue in 2015 for financial reporting purposes. The remaining amount of unearned revenue is to be recognized equally in 2016 and 2017.
4.		The tax rate is 40% in 2014 and all subsequent periods. (Hint: To find taxable income in 2014 and 2015, the related income taxes payable amounts will have to be grossed up.)
5.		No temporary differences existed at the end of 2013. Elbert expects to report taxable income in each of the next 5 years

Determine the amount to report for deferred income taxes at the end of 2014, and indicate how it should be classified on the balance sheet. The amount to report for deferred income taxes s Elbert Inc. Balance Sheet December 31, 2014 SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Prepare the journal entry to record income taxes for 2014. (Credit account titles are automatically indented when amount is entered. Do not indent manually Account Titles and Explanation Debit Credit