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McKane Corporation Deferred Income Tax Expense

The following facts relate to McKane Corporation
1. Deferred tax liability, January 1, 2010, $60,000
2. Deferred tax asset January 1, 2010 $20,000
3. Taxable income for 2010, $115,000
4. Cumulative temporary difference at December 31, 2010 giving rise to future
5. Cumulative temporary difference at December 31, 2010 giving rise to $95,000
6. The tax rate for all years 40%. No permanent difference exists
7. The company is expected to operate profitably in the future
Instructions.

A) Compute the amount of pretax financial income for 2010
B) Prepare the journal entry record income tax expense, deferred income payable for 2010

Solution Preview

This problem requires multiple calculations.

60,000 deferred liability * 40% = 150,000
20,000 deferred liability * 40% = 50,000

Cumulative difference for future taxable amount 12/31 210,000
Cumulative difference for future taxable amount 01/01 150,000
Originating 2010 difference 60,000

Cumulative difference for deductible amounts 12/31 95,000
Cumulative difference for deductible amounts ...

Solution Summary

The solution provides all calculations needed for McKane Corporation, including their pretax financial income, and includes the journal entry to record income tax expense, deferred income payable.

$2.19