ACCOUNTING-Zurich Company reports pretax financial income

Exercise 19-4

Zurich Company reports pretax financial income of $70,000 for 2014. The following items cause taxable income to be different than pretax financial income.

Zurich’s tax rate is 30% for all years, and the company expects to report taxable income in all future years. There are no deferred taxes at the beginning of 2014.

Compute taxable income and income taxes payable for 2014.

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2014.(Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare the income tax expense section of the income statement for 2014, beginning with the line “Income before income taxes.”.(Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Compute the effective income tax rate for 2014.(Round answer to 1 decimal places, e.g. 25.5.)

Exercise 19-8

Button Company has the following two temporary differences between its income tax expense and income taxes payable.

The income tax rate for all years is 40%.

Prepare the journal entry to record income tax expense, deferred income taxes, and income tax payable for 2014, 2015, and 2016.(Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Assuming there were no temporary differences prior to 2014, indicate how deferred taxes will be reported on the 2016 balance sheet. Button’s product warranty is for 12 months.

Prepare the income tax expense section of the income statement for 2016, beginning with the line “Pretax financial income.”(Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Exercise 19-12

The following facts relate to Duncan Corporation.

Compute the amount of pretax financial income for 2014.

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2014.(Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare the income tax expense section of the income statement for 2014, beginning with the line “Income before income taxes.”(Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Compute the effective tax rate for 2014.(Round answer to 0 decimal places, e.g. 25%)