E19.5 (LO 1, 2) (Two Temporary Differences, One Rate, BeginningDeferred Taxes) The following facts relate to Alschuler plc.1. Deferred tax liability, January 1, 2022, £40,000.2. Deferred tax asset, January 1, 2022, £o.3. Taxable income for 2022, £115,000.4. Pretax financial income for 2022, £200,000.5. Cumulative temporary difference at December 31, 2022, giving rise tofuture taxable amounts, £220,000.6. Cumulative temporary difference at December 31, 2022, giving rise tofuture deductible amounts, £35,000.7. Tax rate for all years, 40%.8. The company is expected to operate profitably in the future.Instructionsa. Compute income taxes payable for 2022.b. Prepare the journal entry to record income tax expense, deferredincome taxes, and income taxes payable for 2022.c. Prepare the income tax expense section of the income statement for2022, beginning with the line "Income before income taxes."

Income tax payable: Income tax payable is the amount that is to be paid to the government on the…

Answered: E19.5 (LO 1, 2) (Two Temporary…

E19.5 (LO 1, 2) (Two Temporary Differences, One Rate, Beginning Deferred Taxes) The following facts relate to Alschuler plc.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

E19.5 (LO 1, 2) (Two Temporary Differences, One Rate, Beginning
Deferred Taxes) The following facts relate to Alschuler plc.
1. Deferred tax liability, January 1, 2022, £40,000.
2. Deferred tax asset, January 1, 2022, £o.
3. Taxable income for 2022, £115,000.
4. Pretax financial income for 2022, £200,000.
5. Cumulative temporary difference at December 31, 2022, giving rise to
future taxable amounts, £220,000.
6. Cumulative temporary difference at December 31, 2022, giving rise to
future deductible amounts, £35,000.
7. Tax rate for all years, 40%.
8. The company is expected to operate profitably in the future.
Instructions
a. Compute income taxes payable for 2022.
b. Prepare the journal entry to record income tax expense, deferred
income taxes, and income taxes payable for 2022.
c. Prepare the income tax expense section of the income statement for
2022, beginning with the line "Income before income taxes."

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