Answered Essay: Indigo Corporation Income Statement (Partlal)

Indigo Corporation has one temporary difference at the end of 2017 that will reverse and cause taxable amounts of $57,200 in 2018, $62,600 in 2019, and $67,800 in 2020. Indigo’s pretax financial income for 2017 is $298,500, and the tax rate is 30% for all years. There are no deferred taxes at the beginning of 2017.

a) Compute taxable income and income taxes payable for 2017.
Tax income $_____

Income Tax Payable $_____

b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2017.

c) Prepare the income tax expense section of the income statement for 2017, beginning with the line “Income before income taxes.”.

Indigo Corporation Income Statement (Partlal)

Indigo Corporation Income Statement (Partlal)

Expert Answer


  1. Compute taxable income and income taxes payable for2017

Pretax Book Income   298,500

Temp Dif – 2018          -572,00 DTL

Temp Dif –2019           -62,600 DTL

Temp Dif -2020           -67,800 DTL

Taxable Income               110,900

Tax rate                                  30%

Taxes Payable                  33,270

Temporary difference Tax deductable Enacted tax rate Current Def tax Non current def tax
2018 $57,200 0.3 $17,160
2019 $62,600 0.3 $18,780
2020 $67,800 0.3 $20,340
Balance 2017 $17,160 $39,120
Less:Balance in 2016 0 0
Change $17,160 $39,120
Tax Expense $89,550
Differed tax liability (Current) $17,160
Differed tax liability (Non Current) $39,120
Tax payable $33,270
Income Before income taxes $298,500
Income tax expense $89,550
Net Income $208,950
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