The following information has been obtained for the Gocker SA.
1. Prior to 2018, taxable income and pretax financial income were identical.
2. Pretax financial income is €1,700,000 in 2018 and €1,400,000 in 2019.
3. On January 1, 2018, equipment costing €1,200,000 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. (Under applicable tax law, a half-year of tax depreciation is recorded in 2018 and 2023.)
4. Interest of €60,000 was earned on tax-exempt governmental obligations in 2019.
5. Included in 2019 pretax financial income is a gain on discontinued operations of €200,000, which is fully taxable.
6. The tax rate is 35% for all periods.
7. Taxable income is expected in all future years.
Instructions
a. Compute taxable income and income taxes payable for 2019.
b. Prepare the journal entry to record 2019 income tax expense, income taxes payable, and deferred taxes.
c. Prepare the bottom portion of Gocker's 2019 income statement, beginning with "Income before income taxes."
d. Indicate how deferred income taxes should be presented on the December 31, 2019, statement of financial position.