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Accounting for income taxes payable: Deferred taxes, NOL

QUESTION ONE:
Shetland Inc. had pretax financial income of $154,000 in 2014. Included in the computation of that amount is insurance expense of $4,000 which is not deductible for tax purposes. In addition, depreciation for tax purposes exceeds accounting depreciation by $10,000. Prepare Shetland's journal entry to record 2014 taxes, assuming a tax rate of 45%.

QUESTION TWO:
Conlin Corporation had the following tax information.

Year Taxable Income Tax Rate Taxes Paid
2012 $300,000 35% $105,000
2013 $325,000 30% $97,500
2014 $400,000 30% $120,000

In 2015, Conlin suffered a net operating loss of $480,000, which it elected to carry back. The 2015 enacted tax rate is 29%.

Prepare Conlin's entry to record the effect of the loss carryback. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

QUESTION THREE:
Youngman Corporation has temporary differences at December 31, 2014, that result in the following deferred taxes.
Deferred tax liability—current $38,000
Deferred tax asset—current $(62,000)
Deferred tax liability—noncurrent $96,000
Deferred tax asset—noncurrent $(27,000)
Indicate how these balances would be presented in Youngman's December 31, 2014, balance sheet.

QUESTION FOUR:
The following information is available for Wenger Corporation for 2013.
1. Excess of tax depreciation over book depreciation, $40,000. This $40,000 difference will reverse equally over the years 2014-2017.
2. Deferral, for book purposes, of $20,000 of rent received in advance. The rent will be earned in 2014.
3. Pretax financial income, $300,000.
4. Tax rate for all years, 40%.

Compute taxable income for 2013.

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2013.

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2014, assuming taxable income of $325,000.

Solution Summary

See attached for tutorial, click in cells to see computations. Instructional notes added.

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