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Current and deferred income tax calculations

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The information that follows pertains to Raymond Company. Temporary differences for the year 2006 are summarized below.

Expenses deducted on the tax return, but not included on the income statement:
Depreciation $60,000
Prepaid expense 8,000

Expenses reported on the income statement, but not deducted on the tax return:
Warranty expense 9,000

? No temporary differences existed at the beginning of 2006.
? Taxable income was $8,000 for 2006.
? Income statement for the year included $6,000 interest on municipal bonds.
? The tax rate is 30%.

Required:
Prepare the journal entry to record the tax provision for 2006. Provide supporting computations.

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Solution Summary

The solution analyzes the various differences between book income and tax income for Raymond Company to calculate current and deferred income tax assets and liabilities. A schedule is prepared followed by journal entries and then a proof to confirm the amount of total tax expense.

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Please spend a little time with these calculations to be sure that you understand.

Usually these calculations are done beginning with financial income and ...

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