Prepare the journal entry to record income tax expense

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Question - The differences between the book basis and tax basis of the assets and liabilities of Sheridan Corporation at the end of 2016 are presented below.


Book Basis

Tax Basis

Accounts receivable

$48,100

$0

Litigation liability

30,900

0

It is estimated that the litigation liability will be settled in 2017. The difference in accounts receivable will result in taxable amounts of $29,200 in 2017 and $18,900 in 2018. The company has taxable income of $357,000 in 2016 and is expected to have taxable income in each of the following 2 years. Its enacted tax rate is 34% for all years. This is the company's first year of operations. The operating cycle of the business is 2 years.

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2016.

Indicate how deferred income taxes will be reported on the balance sheet at the end of 2016.

Reference no: EM131592415

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