Question

Fitzgerald Corp. reports pretax accounting income of $210,000, but because of a single temporary difference, taxable income is only $155,000. At the beginning of the year, no temporary differences existed. Fitzgerald is subject to a tax rate of 40%. Prepare the appropriate journal entry to record the company’s income tax expense for the year.

Answer 1

Answer:

Explanation:

For recording of the journal entry, first we have to compute the tax payable amount which is shown below:

Pretax accounting income tax expense =  pretax accounting income × tax rate

= $210,000 × 40%

= $84,000

Tax payable for taxable income = Taxable income × tax rate

= $155,000 × 40%

= $62,000

Now, the journal entry would be:

Income tax expense A/c Dr     $84,000

   To Income tax payable                             $62,000

   To Deferred tax liability                             $22,000

(Being income tax expense recorded)

The remaining amount has come under deferred tax liability.