The following information is available for Carla Corporation for 2019 (its first year of operations).
1. Excess of tax depreciation over book depreciation, $43,800. This $43,800 difference will reverse equally over the years 2020–2023.
2. Deferral, for book purposes, of $18,100 of rent received in advance. The rent will be recognized in 2020.
3. Pretax financial income, $302,100.
4. Tax rate for all years, 20%.

Required:
a. Compute taxable income for 2019.
b. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2019.
c. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020, assuming taxable income of $309,200.

The calculations and journal entries are shown below:

Explanation:

The computations are shown below:

a. The taxable income is

Pretax financial income  $302,100

Less: Excess of tax depreciation over book depreciation-$43,800

Add: Rent received in advance deferred for book purposes $18,100

Taxable income $276,400

b.  The journal entry is shown below:

Income tax expense$60,420  

Deferred tax asset (20% × $18,100)$3,620

           To Income tax payable (20% × $276,400) $55,280

           To Deferred tax liability (20% × $43,800)$8,760

(Being the income tax expense, deferred income taxes, and income taxes payable for 2019 is recorded)

c.  The journal entry is shown below:

Income tax expense$63,270  

Deferred tax liability ($8760 ÷ 4 years)$2,190  

         To Income tax payable (20% × $309,200)  $61,840

         To Deferred tax asset (20% × $18,100)$3,620

(Being the income tax expense, deferred income taxes, and income taxes payable for 20 is recorded)

both are integral parts of a corporate balance sheet. the cash flow statement, or statement of cash flows, measures the sources of a company's cash and its uses of cash over a specific time period. the income statement measures a company's financial performance, such as revenues, expenses, profits or losses over a specific time period (in fact, it's sometimes called a statement of financial performance).

a cash flow statement shows exactly how much money a company has received and how much it has spent, traditionally over a period of one month. it captures the current operating results and changes on the balance sheet, such as increases or decreases in accounts receivable or accounts payable, and does not include noncash accounting items such as depreciation and amortization. the cash flow generally comes from revenue received as a result of business activity, but it may be augmented by funds available as a result of credit. a cash flow statement is used to determine the short-term viability and liquidity of a company, specifically how well it is positioned to pay its bills and vendors.

88 because 4 plus 4 equals 8. 40 plus 40 equals 80. 80 plus 8 equals 88