Tax rate: 40%

The Blaylock Company in year 1 has pretax financial income (Income Before Tax) at the end of 2016 of $610,000.There are 3 differences between the pretax financial statement and the tax return income as shown below: 3 items were different on Financial Statement compared to Tax Return Financial StatementTax Return

a. Depreciation S/L $10,000 $20,000 accelerated

b. Percentage of Completion Profit $35,000 -0- completed contract

c. Unearned Revenue of $30,000 $30,000 earned this year

Required:

1. Prepare a handy schedule that shows the reconciliation between F/S and T/R.

2. Complete the schedule to reflect:

a. Income Tax Expense

b. Income Tax Payable

c. Deferred Income Taxes

3. Prepare the year end adjusting entry to record income tax expense, income tax payable and any deferred income taxes.

The Blaylock Company in year 2 has pretax financial income (Income Before Tax) at the end of 2016 of $110,000.

There are now 4 differences between the pretax financial statement and the tax return income as shown below: 4 items were different on Financial Statement compared to Tax Return and Financial StatementTax Return

a. Depreciation S/L $10,000 $15,000 accelerated

b. Percentage of Completion Profit -0- $ 60,000 now completed

c. Earned Revenue of $30,000 -0- this year

d. EPA fine of $12,000 -0- not deductible

Required:

1. Prepare a handy schedule that shows the reconciliation between F/S and T/R.

2. Complete the schedule to reflect:

a. Income Tax Expense

b. Income Tax Payable

c. Deferred Income Taxes

3. Prepare the year end adjusting entry to record income tax expense, income tax payable and any deferred income taxes.