Shannon Polymers uses straight-line depreciation for financial reporting purposes for equipment costing $840,000 and with an expected useful life of four years and no residual value. Assume that, for tax purposes, the deduction is 40%, 30%, 20%, and 10% in those years. Pretax accounting income the first year the equipment was used was $960,000, which includes interest revenue of $28,000 from municipal governmental bonds. Other than the two described, there are no differences between accounting income and taxable income. The enacted tax rate is 25%. Prepare the journal entry to record income taxes. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
Shannon Polymers uses straight-line depreciation for financial reporting purposes for equipment costing $840,000 and with an expected useful life of four years and no residual value. Assume that, for tax purposes, the deduction is 40%, 30%, 20%, and 10% in those years. Pretax accounting income the first year the equipment was used was $960,000, which includes interest revenue of $28,000 from municipal governmental bonds. Other than the two described, there are no differences between accounting income and taxable income. The enacted tax rate is 25%. Prepare the journal entry to record income taxes. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Shannon Polymers uses straight-line depreciation for financial reporting purposes for equipment costing $840,000 and with an
expected useful life of four years and no residual value. Assume that, for tax purposes, the deduction is 40%, 30%, 20%, and 10% in
those years. Pretax accounting income the first year the equipment was used was $960,000, which includes interest revenue of
$28,000 from municipal governmental bonds. Other than the two described, there are no differences between accounting income and
taxable income. The enacted tax rate is 25%.
Prepare the journal entry to record income taxes.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
Answer is complete but not entirely correct.
1
No
Transaction
1
Income tax expense
Deferred tax liability
Income tax payable
General Journal
Debit
Credit
233,000
201,500
31,500
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