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

1.		Year		Amount Due per Tax Return
		2017		$135,400
		2018		101,100

2.		On January 1, 2017, equipment costing $587,600 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 2018, $220,200 is collected in advance rental of a building for a 3-year period. The entire $220,200 is reported as taxable income in 2018, but $146,800 of the $220,200 is reported as unearned revenue in 2018 for financial reporting purposes. The remaining amount of unearned revenue is to be recognized equally in 2019 and 2020.
4.		The tax rate is 40% in 2017 and all subsequent periods. (Hint: To find taxable income in 2017 and 2018, the related income taxes payable amounts will have to be grossed up.)
5.		No temporary differences existed at the end of 2016. Sheridan expects to report taxable income in each of the next 5 years.

Problem 19-8 The following information was disclosed during the audit of Sheridan Inc. 1. Year Amount Due per Tax Return 2017 $135,400 101,100 2018 3. 2. On January 1, 2017, equipment costing $587,600 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.) In January 2018, $220,200 is collected in advance rental of a building for a 3-year period. The entire $220,200 is reported as taxable income in 2018, but $146,800 of the $220,200 is reported as unearned revenue in 2018 for financial reporting purposes. The remaining amount of unearned revenue is to be recognized equally in 2019 and 2020. 4. The tax rate is 40% in 2017 and all subsequent periods. (Hint: To find taxable income in 2017 and 2018, the related income taxes payable amounts will have to be "grossed up.") 5. No temporary differences existed at the end of 2016. Sheridan expects to report taxable income in each of the next 5 years. Your answer is partially correct. Try again. Determine the amount to report for deferred income taxes at the end of 2017, and indicate how it should be classified on the balance sheet. The amount to report for deferred income taxes 82224 Sheridan Inc. Balance Sheet December 31, 2017 Current Assets Deferred Tax Asset C F 29360 29369| SHOW LIST OF ACCOUNTS Your answer is partially correct. Try again. Prepare the journal entry to record income taxes 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 o for the amounts.) Account Titles and Explanation Debit Credit Income Tax Expense Deferred Tax Asset Income Tax Payable SHOW LIST OF ACCOUNTS Draft the income tax section of the income statement for 2017, beginning with "Income before income taxes." (Hint: You must compute taxable income and then combine that with changes in cumulative temporary differences to arrive at pretax financial income. (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Sheridan Inc. Income Statement (Partial) December 31, 2017 Income before Income Taxes 105950 Income Tax Expense Current 101100 Deferred Deferred (58720) 42380 Net Income / (Loss) 63570 SHOW LIST OF ACCOUNTS Your answer is partially correct. Try again. Determine the deferred income taxes at the end of 2018, and indicate how they should be classified on the balance sheet. The deferred income taxes Sheridan Inc. Balance Sheet December 31, 2018 SHOW LIST OF ACCOUNTS Draft the income tax section of the income statement for 2018, beginning with "Income before income taxes." (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Sheridan Inc. Income Statement (Partial) For the Year Ended December 31, 2018 Income before Income Taxes Income Tax Expense Tcurrent Deferred Net Income / (Loss) Click if you would like to Show Work for this question: Open Show Work SHOW LIST OF ACCOUNTS X Your answer is incorrect. Try again. Prepare the journal entry to record income taxes for 2018. (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 o for the amounts.) Account Titles and Explanation Debit Credit SHOW LIST OF ACCOUNTS