Question
The following differences apply to the reconciliation of accounting income and taxable income of Gatsby Inc. for calendar 2018, its first year of operations. The
The following differences apply to the reconciliation of accounting income and taxable income of Gatsby Inc. for calendar 2018, its first year of operations. The enacted income tax rate is 30% for all years.
Accounting income $440,000 Differences:
Excess CCA (220,000)
Lawsuit accrual 30,000
Unearned rent revenue deferred on the books but correctly included in taxable income 20,000
Dividend income from Canadian corporations (12,000)
Taxable income $258,000 1.
Excess CCA will reverse equally over a four-year period, 20192022.
2. It is estimated that the lawsuit accrual will be paid in 2022.
3. Unearned rent revenue will be recognized as earned equally over a four year period, 2019 2022.
c)Since this is the first year of operations, there is no beginning deferred tax asset or liability. Calculate the net deferred tax expense (benefit) for 2018
d) Prepare journal entries to record income tax expense, deferred taxes, and income taxes payable for 2018.
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