Question

A company reports pretax accounting income of $10 million, but because of a single temporary difference, taxable income is only $7 million. No temporary differences existed at the beginning of the year, and the tax rate is 40%.

Prepare the appropriate journal entry to record income taxes. (If no entry is required for a particular event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)

Answer 1

Consider the following analysis.

Step-by-step explanation:

Journal Entries

• Income tax expense.............$4,0000,000

• Deferred tax liability (10 million - 7 million )*40%........$1,200,00

• Income tax payable (7 million * 40% )................$2,800,000

Using decimals is 4.0, 1.2, and 2.8.