PART 1 : ABC Company had the following details regarding deferred taxes in 2013:
Pre-Tax Financial Income 140,000
Tax-Exempt Municipal Income 5,000
Non-Deductible Fines 15,000
Taxable Rental Revenue 30,000
Excess Depreciation on Tax Return 45,000
Income Tax Rate 35%
-The rental revenue is from rents collected in advance. The $30,000 will be earned evenly over the next two years (per GAAP).
-The excess depreciation will reverse evenly over the next three years.
1) Calculate taxable income
2) Prepare the journal entry(s) to record the income tax expense and deferred taxes
Please show work.
PART 2:
In 2014, ABC Company had the following data:
Pre-Tax Financial Income 105,000
Tax-Exempt Interest 5,000
Less Rental Revenue (non-taxable) 15,000 (reversal from 2013)
Add Reversal of Depreciation 15,000 (reversal from 2013)
Tax Rate 35%
-There were no other differences from 2014 transactions.
1) Calculate the taxable income for 2014
2) Prepare the journal entry for income tax expense and deferred taxes
3) Calculate the ending balance in deferred tax asset and deferred tax liability at the end of 2014