Answer:
A. Credit $5,000
B. Dr Income tax expense $1,005,000
Cr Income tax pay$1,000,000
Cr Deferred tax liability $5,000
Explanation:
Calculation for What is the deferred tax liability to be reported in the balance sheet
Deferred tax liability=[ (400,000-300,000)*.25]-20,000
Deferred tax liability=($100,000*.25)-$20,000
Deferred tax liability=$25,000-$20,000
Deferred tax liability=$5,000 Credit
Therefore the deferred tax liability to be reported in the balance sheet will be $5,000 Credit
B. Preparation of the appropriate journal entry to record income taxes this year.
Dr Income tax expense $1,005,000
Cr Income tax pay$1,000,000
(4million *.25)
Cr Deferred tax liability $5,000
