The following information has been obtained for Pronghorn Corporation.

1.		Prior to 2017, taxable income and pretax financial income were identical.
2.		Pretax financial income is $1,615,000 in 2017 and $1,393,000 in 2018.
3.		On January 1, 2017, equipment costing $1,092,000 is purchased. It is to be depreciated on a straight-line basis over 5 years for tax purposes and over 8 years for financial reporting purposes. (Hint: Use the half-year convention for tax purposes, as discussed in Appendix 11A.)
4.		Interest of $58,000 was earned on tax-exempt municipal obligations in 2018.
5.		Included in 2018 pretax financial income is a gain on discontinued operations of $180,000, which is fully taxable.
6.		The tax rate is 35% for all periods.
7.		Taxable income is expected in all future years.

1.) Compute taxable income and income taxes payable for 2018.

Taxable income		$
Income taxes payable		$

2) Prepare the journal entry to record 2018 income tax expense, income taxes payable, and deferred taxes. (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.)

3) Prepare the bottom portion of Pronghorns 2018 income statement, beginning with Income from continuing operations before income taxes. (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

4) Indicate how deferred income taxes should be presented on the December 31, 2018, balance sheet.

List of Accounts

• 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

*ONLY USE ABOVE ACCOUNTS'

ANSWER ALL 4 QUESTIONS

USE TEMPLATES AS ABOVE

THANK YOU!

Account Titles and Explanation Debit Credit Pronghorn Corporation Income Statement (Partial) Pronghorn Corporation Balance Sheet