Smart Services computed pretax financial income of $220,000 for its first year of operations ended December 31,2014.In preparing the income tax return for the year,the tax accountant determined the following differences between 2014 financial income and taxable income:

The temporary difference is expected to reverse in the following pattern:

The enacted tax rates for this year and the next three years are as follows:

Use the provisions of FASB Statement No.109.
(1)Prepare a schedule showing the reversal of the temporary differences and the computation of income taxes payable and deferred tax assets or liabilities as of December 31,2014.
(2)Prepare journal entries to record income taxes payable and deferred income taxes.
(3)Prepare the income statement for Smart Services beginning with "Income from continuing operations before income taxes" for the year ended December 31,2014.

Question

Smart Services computed pretax financial income of $220,000 for its first year of operations ended December 31,2014.In preparing the income tax return for the year,the tax accountant determined the following differences between 2014 financial income and taxable income:
  
The temporary difference is expected to reverse in the following pattern:
  
The enacted tax rates for this year and the next three years are as follows:
  
Use the provisions of FASB Statement No.109.
(1)Prepare a schedule showing the reversal of the temporary differences and the computation of income taxes payable and deferred tax assets or liabilities as of December 31,2014.
(2)Prepare journal entries to record income taxes payable and deferred income taxes.
(3)Prepare the income statement for Smart Services beginning with "Income from continuing operations before income taxes" for the year ended December 31,2014.

Quizplus · Accepted Answer

The Answer of Smart Services computed pretax financial income of $220,000 for its first year of operations ended December 31,2014.In preparing the income tax return for the year,the tax accountant determined the following differences between 2014 financial income and taxable income:
  
The temporary difference is expected to reverse in the following pattern:
  
The enacted tax rates for this year and the next three years are as follows:
  
Use the provisions of FASB Statement No.109.
(1)Prepare a schedule showing the reversal of the temporary differences and the computation of income taxes payable and deferred tax assets or liabilities as of December 31,2014.
(2)Prepare journal entries to record income taxes payable and deferred income taxes.
(3)Prepare the income statement for Smart Services beginning with "Income from continuing operations before income taxes" for the year ended December 31,2014.

Smart Services Computed Pretax Financial Income of $220,000 for Its