Answer:
Income tax expense is $8,250. It is recorded by debiting Income tax expense by $8,250 and crediting Income tax payable by $8,250.
Explanation:
The income tax rate is 25%. Income tax is calculated on the taxable income after all other adjustments have been made.
Note that the question gives an income figure of $33,000. This is stated as the <em>income after the preceding adjustments but before income taxes.</em> Hence, this is the amount on which we calculate the income tax expense as follows.
Income tax expense = Taxable income x Income tax rate
= $33,000 x 0.25
= $8,250
The next requirement is to record the income tax expense in the journal. This income tax has not yet been paid by the company. Therefore, an income tax payable liability is created. The journal entry is as follows.
Debit: Income tax expense $8,250
Credit: Income tax payable $8,250
