Answer:
See the journal entry below.
Explanation:
Before preparing the journal entry, the following are calculated first:
Income tax expense in 2019 = (Taxable income in 2019 * Tax rate in 2019) + (Taxable income in 2020 * Tax rate in 2020) + (Taxable income in 2021 * Tax rate in 2021) = ($158,000 * 40%) + ($195,000 * 45%) + ($92,100 * 45%) = $193,395
Deferred tax liability in 2019 = (Taxable income in 2020 * Tax rate in 2020) + (Taxable income in 2021 * Tax rate in 2021) = ($195,000 * 45%) + ($92,100 * 45%) = $129,195
Income tax payable in 2019 = Taxable income in 2019 * Tax rate in 2019 = $158,000 * 40% = $63,200
Income tax payable in 2020 = Taxable income in 2020 * Tax rate in 2020 = $195,000 * 45% = $87,750
Income tax payable in 2021 = Taxable income in 2021 * Tax rate in 2021 = $92,100 * 45% = $41,445
The journal entry will look as follows:
<u>Date General journal Debit ($) Credit ($) </u>
31 Dec 2019 Income tax expense 193,395
Deferred tax liability 129,195
Income tax payable 63,200
<u><em> (To record income tax payable.) </em></u>
31 Dec 2020 Deferred tax liability 87,750
Income tax payable 87,750
<u><em> (To record income tax payable.) </em></u>
31 Dec 2021 Deferred tax liability 41,445
Income tax payable 41,445
<u><em> (To record income tax payable.) </em></u>
