Shannon polymers uses straight-line depreciation for financial reporting purposes for equipment costing $660,000 and with an expected useful life of 4 years and no residual value. for tax purposes, the deduction is 40%, 30%, 20%, and 10% in those years. pretax accounting income the first year the equipment was used was $760,000, which includes interest revenue of $18,000 from municipal bonds. other than the two described, there are no differences between accounting income and taxable income. the enacted tax rate is 35%. prepare the journal entry to record income taxes. (if no entry is required for a transaction/event, select "no journal entry required" in the first account field.)

Pretax accounting income = $760,000

Depreciation as per books =

                                             = $165,000

Depreciation as per income tax = $660,000 × 40%

                                                      = $264,000

Interest revenue on municipal bonds = $18,000

Taxable Income:

= Pretax accounting income + Depreciation as per books - Depreciation as per income tax - Interest revenue on municipal bonds

= $760,000 + $165,000 - $264,000 - $18,000

= $643,000

Income Tax Liability = 35% × Taxable Income

                                 = 0.35 × $643,000

                                 = $225,050

Temporary difference resulting in future taxable amount:

= Depreciation as per income tax -  Depreciation as per books

= $264,000 - $165,000

= $99,000

Deferred Tax Liability = 35% × $99,000

                                    = $34,650

Journal Entries - Shannon Polymers

Income Tax Expense A/c                Dr     $259,700    

To Income Tax Payable                                              $225,050

To Deferred Tax Liability                                            $34,650

(Being income tax and deferred tax recorded for first year)

answer; normative economics;