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P18.4 The accounting income of Grace Corporation and its taxable income for the years 2023 to 2026 are as follows: Year Accounting Income Taxable Income 2023 2024 2025 2026 $460,000 420,000 390,000 460,000 $299,000 294,000 304,200 644,000 Tax Rate 25% 30% 30% 30% The change in the tax rate from 25% to 30% was not enacted until early in 2024. Accounting income for each year includes an expense of $40,000 that will never be deductible for tax purposes. The remainder of the difference between accounting income and taxable income in each period is due to one reversing difference for the depreciation of property, plant, and equipment. No deferred taxes existed at the beginning of 2023.

P18.4 The accounting income of Grace Corporation and its taxable income for the years 2023 to 2026 are as follows: Year Accounting Income Taxable Income 2023 2024 2025 2026 $460,000 420,000 390,000 460,000 $299,000 294,000 304,200 644,000 Tax Rate 25% 30% 30% 30% The change in the tax rate from 25% to 30% was not enacted until early in 2024. Accounting income for each year includes an expense of $40,000 that will never be deductible for tax purposes. The remainder of the difference between accounting income and taxable income in each period is due to one reversing difference for the depreciation of property, plant, and equipment. No deferred taxes existed at the beginning of 2023.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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P18.4 The accounting income of Grace Corporation and its taxable income for the years 2023 to 2026 are as follows: Accounting Income Taxable Income Year 2023 2024 2025 2026 $460,000 420,000 390,000 460,000 $299,000 294,000 304,200 644,000 Tax Rate 25% 30% 30% 30% The change in the tax rate from 25% to 30% was not enacted until early in 2024. Accounting income for each year includes an expense of $40,000 that will never be deductible for tax purposes. The remainder of the difference between accounting income and taxable income in each period is due to one reversing difference for the depreciation of property, plant, and equipment. No deferred taxes existed at the beginning of 2023. Instructions b. Prepare journal entries to record income taxes in all four years. c. Prepare the bottom of the income statement for 2024, beginning with the line "Income before income tax." a. Calculate the current and deferred tax expense or benefit for each of the four years. Also calculate the balance of the deferred tax balance sheet account at the end of each fiscal year from 2023 to 2026.
Transcribed Image Text:P18.4 The accounting income of Grace Corporation and its taxable income for the years 2023 to 2026 are as follows: Accounting Income Taxable Income Year 2023 2024 2025 2026 $460,000 420,000 390,000 460,000 $299,000 294,000 304,200 644,000 Tax Rate 25% 30% 30% 30% The change in the tax rate from 25% to 30% was not enacted until early in 2024. Accounting income for each year includes an expense of $40,000 that will never be deductible for tax purposes. The remainder of the difference between accounting income and taxable income in each period is due to one reversing difference for the depreciation of property, plant, and equipment. No deferred taxes existed at the beginning of 2023. Instructions b. Prepare journal entries to record income taxes in all four years. c. Prepare the bottom of the income statement for 2024, beginning with the line "Income before income tax." a. Calculate the current and deferred tax expense or benefit for each of the four years. Also calculate the balance of the deferred tax balance sheet account at the end of each fiscal year from 2023 to 2026.
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