Question

Prepare the appropriate journal entry to record Lance's income tax provision for 2013.

Option 1:
Debit: Income Tax Expense $400,000
Credit: Deferred Tax Asset $400,000

Option 2:
Debit: Warranty Expense $400,000
Credit: Income Tax Payable $400,000

Option 3:
Debit: Deferred Tax Liability $400,000
Credit: Income Tax Expense $400,000

Option 4:
Debit: Deferred Tax Asset $400,000
Credit: Income Tax Payable $400,000

Answer 1

The appropriate journal entry to record Lance's income tax provision for 2013 is Option 1: Debit: Income Tax Expense $400,000 and Credit: Deferred Tax Asset $400,000.

Step-by-step explanation:

The appropriate journal entry to record Lance's income tax provision for 2013 is Option 1: Debit: Income Tax Expense $400,000 and Credit: Deferred Tax Asset $400,000.

This entry is made because the income tax provision represents the tax expense that the company expects to pay based on its taxable income. The debit to Income Tax Expense recognizes this expense, while the credit to Deferred Tax Asset represents the company's estimate of the future tax benefits it will receive from the provision.