12-34A Computing and recording a corporation’s income tax [15–20 min]

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12-34A Computing and recording a corporation’s income tax [15–20 min]
The accounting records of Rhyme Redwood Corporation provide income statement
data for 2012.

Total revenue 940,000
Total expenses 750000
Income before tax 190000

Total expenses include depreciation of $50,000 computed on the straight-line
method. In calculating taxable income on the tax return, Rhyme Redwood uses the
modified accelerated cost recovery system (MACRS). MACRS depreciation was
$80,000 for 2012. The corporate income tax rate is 34%.

Requirements

1. Compute taxable income for the year. For this computation, substitute MACRS
depreciation in place of straight-line depreciation.

2. Journalize the corporation’s income tax for 2012.

3. Show how to report the two income tax liabilities on Rhyme’s classified
balance sheet.