Answer:
Debit deferred tax asset for $12,000
Debit income tax expense for $18,000
Credit income tax payable for $30,000
Explanation:
The journal entries will look as follows:
<u>Date Account Name and Description Debit ($) Credit ($) </u>
20X1 Deferred tax asset (w.1) 12,000
Income tax expense (w.3) 18,000
Income tax payable (w.2) 30,000
<em><u> (To record income taxes at the end of 20X1.) </u></em>
Workings:
w.1: Deferred tax asset = Deferred portion of the rent collected in 20X1 * Tax rate = $40,000 * 12% = $12,000
w.2: Income tax payable = Taxable income * Tax rate = $100,000 * 30% = $30,000
w.3: Income tax expense = Income tax payable - Deferred tax asset = $30,000 - $12,000 = $18,000
