Shaw Corporation reported pretax book income of $1,120,000.Included in the computation were favorable temporary differences of$250,000, unfavorable temporary differences of $249,000, andfavorable permanent differences of $170,000. Assuming a tax rate of34 percent, compute the companyâs deferred income tax expense orbenefit.
Shaw Corporation reported pretax book income of $1,120,000.Included in the computation were favorable temporary differences of$250,000, unfavorable temporary differences of $249,000, andfavorable permanent differences of $170,000. Assuming a tax rate of34 percent, compute the companyâs deferred income tax expense orbenefit.
Related questions
Information for Entity A for the year ended December 31, 2018 ($ in millions):
| Income from continuing operations before tax | $160 |
| Temporary differences (all related to operating income): | |
| Accrued warranty expense in excess of expense included in operating income |
|
| Depreciation deducted on tax return in excess of depreciation expense |
|
| Permanent differences (all related to operating income): | |
| Nondeductible portion of entertainment expense | 8 |
| Interest received on municipal bonds | 3 |
| Balance in deferred tax asset account, January 1, 2018 | 1 |
| Balance in deferred tax liability account, January 1, 2018 | 2 |
| The applicable enacted tax rate for all periods is 40%. |
Show work.
A. Prepare the appropriate journal entry to record income taxes.
B. What is Entity A's net income?
C. Sometimes a temporary difference will produce future deductible amounts. Explain what is meant by future deductible amounts. Describe at least one situation that has this effect, for example, one example is when rent revenue is collected in advance from tenants (deferred rent revenue for financial accounting purposes) but will be recognized as the tenants occupy the property. You can think of others. How are future deductible amounts recognized in the financial statements? As between deferred tax assets and deferred tax liabilities, which would management prefer and why?
