Information for Clark Corp. for the year 2010:
Reconciliation of pretax accounting income and taxable income:
Pretax accounting income $180,000
Permanent differences (15,000)
165,000
Temporary difference-depreciation (12,000)
Taxable income $153,000
Cumulative temporary differences - all from depreciation:
As of 12/31/09 $83,000
As of 12/31/10 $95,000
The enacted tax rate is 40% for 2010, 35% for 2011, and 35% thereafter. Calculate Clark’s income tax expense for 2010.
Northern Corporation began operations in January 2011, and purchased a machine for $20,000. Northern uses straight-line depreciation over a four-year period for financial reporting purposes. For tax purposes, the deduction is 50% of cost in 2011, 30% in 2012, and 20% in 2013. Pretax accounting income for 2011 was $150,000, which includes interest revenue of $20,000 from municipal bonds. The enacted tax rate is 40% for all years. There are no other differences between accounting and taxable income.
a) Prepare a well-labeled table that reconciles pre-tax accounting income to taxable income and calculate income taxes due for the year 2011.
b) Calculate the change in the deferred income taxes.
c) Prepare the 2011 journal entry to record the income tax expense.