E19-12B (Two Temporary Differences, One Rate, Beginning Deferred Taxes, Compute Pretax Financial Income) The following facts relate to Integrated Products Corporation.;1 Deferred tax liability, January 1, 2007, $225,000.;2 Deferred tax asset, January 1, 2007, $162,000.;3 Taxable income for 2007, $386,000.;4 Cumulative temporary difference at December 31, 2007, giving rise to future taxable amounts, $838,000.;5 Cumulative temporary difference at December 31, 2007, giving rise to future deductible amounts, $965,000.;6 Tax rate for all years, 30%. No permanent differences exist.;7 The company is expected to operate profitably in the future.;Instructions;(a) Compute the amount of pretax financial income for 2007.;(b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2007.;(c) Prepare the income tax expense section of the income statement for 2007, beginning with the line ?Income before income taxes.?;(d) Compute the effective tax rate for 2007.
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