Answer:
The Journal entry and their narrations is shown below:
Explanation:
The Journal entry is shown below:-
Income tax expenses Dr, $43,140
To income tax payable $40,140
To Deferred tax liability $3,000
(Being Income tax expenses for the year is recorded)
Working Note 1:-
Income as per tax purpose
Pretax financial income $139,400
Add: permanent difference
Disallowed insurance expenses $4,400
Less: Timing difference
Excess depreciation allowed $10,000
Income as per tax purpose $133,800
Working Note 2
Income tax payable
= Income tax rate × Income as per tax purposes
= 30% × $133,800
= $40,140
Working Note 3
Deferred tax liability = Timing difference × Tax rate
= $10,000 × 30%
= $3,000
