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Chapter 19: Question 8BE (page 1094)

Mitchell Corporation had income before income taxes of \(195,000 in 2017. Mitchell’s current income tax expense is \)48,000, and deferred income tax expense is $30,000. Prepare Mitchell’s 2017 income statement, beginning with Income before income taxes.

Short Answer

Expert verified

Theincome statementrecords theincome tax expenseof the firm that is incurred for theprevious financial year. The amount oftotal income tax expenseisdeductedfrom thefirm's total incometo calculate thenet income or loss.

Step by step solution

01

Given the amounts as

Particulars

Amount

Income before income tax for 2017

$195,000

Current income tax

$48,000

Deferred income tax expense

$30,000

02

Preparation of the income statement for 2017

Mitchell Corporation
Income Statement

Particulars

Amount

Income before income taxes

$195,000

Income tax expense

Current income tax

$48,000

Add: Deferred income tax

$30,000

Total income tax expense

$78,000

Net income/loss

$117,000

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Most popular questions from this chapter

At the end of the year, Falabella Co. has pretax financial income of \(550,000. Included in the \)550,000 is \(70,000 interest income on municipal bonds, \)25,000 fine for dumping hazardous waste, and depreciation of \(60,000. Depreciation for tax purposes is \)45,000. Compute income taxes payable, assuming the tax rate is 30% for all periods.

How are deferred tax assets and deferred tax liabilities reported on the statement of financial position under IFRS?

Where can authoritative IFRS related to the accounting for taxes be found?

Question: Interest on municipal bonds is referred to as a permanent difference when determining the proper amount to report for deferred taxes. Explain the meaning of permanent differences, and give two other examples.

(Explain Future Taxable and Deductible Amounts, How Carryback and Carryforward Affects Deferred Taxes) Maria Rodriquez and Lynette Kingston are discussing accounting for income taxes. They are currently studying a schedule of taxable and deductible amounts that will arise in the future as a result of existing temporary differences. The schedule is as follows.

Future Years

2017

2018

2019

2020

2021

Taxable income

\(850,000

Taxable amounts

\)375,000

\(375,000

\)375,000

$375,000

Deductible amounts

(2,400,000)

Enacted tax rate

50%

45%

40%

35%

30%

Instructions

  1. Explain the concept of future taxable amounts and future deductible amounts as illustrated in the schedule.
  2. How do the carryback and carryforward provisions affect the reporting of deferred tax assets and deferred tax liabilities?
See all solutions

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