The following information is available for McKee plc for 2019.
1. Excess of tax depreciation over book depreciation, £40,000. This £40,000 difference will reverse equally over the years 2020-2023.
2. Deferral, for book purposes, of £25,000 of rent received in advance. The rent will be recorded as revenue in 2020.
3. Pretax financial income, £350,000.
4. Tax rate for all years, 40%.
Instructions
a. Compute taxable income for 2019.
b. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2019.
c. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020, assuming taxable income of £325,000.