Deferred tax asset : The process of paying over and above the required level of tax is termed deferred tax asset. These taxes are calculated and paid on the future expected income. In case the future expected inflow of cash reduces, the company can claim the excess tax paid in the form of tax relief or refund. Deferred tax liability : Some business activities may create a dissimilarity between the amount recorded in the books and the taxable income. These differences create deferred tax liability. For example, Mr.J is a car dealer who sold a car on installment. The actual sale happened in the current year, but the benefits are receivable in the future years. This creates a difference in the books of accounts and the taxable account. Taxable income: Income which is earned over and above the permissible limit is considered taxable income. In other words, earnings that are eligible for tax computation after allowing or deducting eligible legal deductions is termed taxable income. Pretax financial income: Income that is computed based on the records and documents presented by the individual, firm, or an entity is termed pretax financial income. Generally, the pretax financial income is the income which is eligible for computing or determining the net tax liability of the individual, firm, or an entity. To determine and record the journal entry for the income tax expense. Given information: Pretax financial income is $500,000. Fines and penalties is $26,000 and tax exempted interest is $28,000. Excess gross profit on installment is $448,000. Rate of tax is 40%.

Question

Want to see the full answer?

Answer 1

Question

Chapter 19, Problem 4UJ

To determine

Deferred tax asset: The process of paying over and above the required level of tax is termed deferred tax asset. These taxes are calculated and paid on the future expected income. In case the future expected inflow of cash reduces, the company can claim the excess tax paid in the form of tax relief or refund.

Deferred tax liability: Some business activities may create a dissimilarity between the amount recorded in the books and the taxable income. These differences create deferred tax liability. For example, Mr.J is a car dealer who sold a car on installment. The actual sale happened in the current year, but the benefits are receivable in the future years. This creates a difference in the books of accounts and the taxable account.

Taxable income: Income which is earned over and above the permissible limit is considered taxable income. In other words, earnings that are eligible for tax computation after allowing or deducting eligible legal deductions is termed taxable income.

Pretax financial income: Income that is computed based on the records and documents presented by the individual, firm, or an entity is termed pretax financial income. Generally, the pretax financial income is the income which is eligible for computing or determining the net tax liability of the individual, firm, or an entity.

To determine and record the journal entry for the income tax expense.

Given information: Pretax financial income is $500,000.

Fines and penalties is $26,000 and tax exempted interest is $28,000.

Excess gross profit on installment is $448,000.

Rate of tax is 40%.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Determine the amount to be paid in full settlement of each invoice, assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period. Freight Paid Returns and Merchandise by Seller Freight Terms Allowances a. $9,400 $282 FOB Shipping Point, 1/10, net 30 $900 b. $8,600 $60 FOB Destination, 2/10, net 45 $1,900 a. $ b. $

Travis Company purchased merchandise on account from a supplier for $13,200, terms 2/10, net 30 on December 26. Travis Company paid for the merchandise on December 31, within the discount period. Required: Under a perpetual inventory system, record the journal entries required for the above transactions. Refer to the Chart of Accounts for exact wording of account titles.

Cullumber Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2025, Job 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $16,800, direct labor $10,080, and manufacturing overhead $13,440. As of January 1, Job 49 had been completed at a cost of $75,600 and was part of finished goods inventory. There was a $12,600 balance in the Raw Materials Inventory account on January 1. During the month of January, Cullumber Company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were sold on account during the month for $102,480 and $132,720, respectively. The following additional events occurred during the month. 1. Purchased additional raw materials of $75,600 on account. 2. Incurred factory labor costs of $58,800. 3. Incurred manufacturing overhead costs as follows: depreciation expense on equipment $10,080; and various other…