Question

At the end of the year, the deferred tax asset account had a balance of $4 million attributable to a temporary difference of $16 million in a liability for estimated expenses. Taxable income is $60 million. No temporary differences existed at the beginning of the year, and the tax rate is 25%. Prepare the journal entry(s) to record income taxes, assuming it is more likely than not that three-fourths of the deferred tax asset will not ultimately be realized. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

Answer 1

Answer:

the answer given below;

Explanation:

$60 million *25%=$15 million will be tax expense

Income Tax Expense-Current  Dr.$15 million

Income Tax Payable  Cr.$15 million

For temporary difference on liability, the journal entry will be

Deferred tax expense ($4*25%)   $1 million

Deferred Tax liability                     $1 million