Solution-Prepare income tax expense section of the income

Prepare income tax expense section of the income statement

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Reference no: EM133117837

Question - Indigo Inc. has two temporary differences at the end of 2022. The first difference stems from installment sales, and the second one results from the accrual of a loss contingency. Flynn's accounting department has developed a schedule of future taxable and deductible amounts related to these temporary differences as follows.

	2023	2024	2025	2026
Taxable amounts	$40,000	$50,000	$60,000	$90,000
Deductible amounts	-	(25,000)	(32,000)	-

As of the beginning of 2022, the enacted tax rate is 34% for 2022 and 2023, and 38% for 2024-2027. At the beginning of 2022, the company had $20,000 balance in deferred tax liability and zero balance in deferred tax assets. Taxable income for 2022 is $400,000. Taxable income is expected in all future years. Pre-tax financial income for 2022 is $246,882.

Required -

a) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2022.

b) Prepare the income tax expense section of the income statement for 2022, beginning with the line "Income before income taxes."

Reference no: EM133117837

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Prepare income tax expense section of the income statement

Reference no: EM133117837

Reference no: EM133117837

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