i. Year Taxable Income Tax Rate

2017 $380,000 35%

2018 433,000 30%

2019 465,000 30%

2020 492,000 30%

ii. On January 1, 2017, heavy equipment costing $1,000,000 was purchased. The equipment had a life of 4 years and no salvage value. The straight-line method of depreciation is used for book[1] purposes and the tax depreciation taken each year is listed below:

Tax Depreciation

2017 2018 2019 2020 Total

$330,000 $450,000 $150,000 $70,000 $1,000,000

iii. On January 1, 2018, $480,000 was collected in advance for rental of a building for a three-year period. The entire $480,000 was reported as taxable income in 2018, but $320,000 of the $480,000 was reported as unearned revenue at December 31, 2018 for book purposes.

Instructions

  • Prepare the journal entry to record income tax expense, deferred income taxes, and income tax payable for 2017. (4 points)
  • Prepare the journal entry to record income tax expense, deferred income taxes, and income tax payable for 2018. (4 points)
  • Prepare the journal entry to record income tax expense, deferred income taxes, and income tax payable for 2019. (4 points)


[1] Please note: book purposes is same as financial reporting purposes

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