Question

Newberry corp. has pretax accounting income of $100,000. newberry has tax depreciation in excess of financial accounting depreciation of $20,000. bad debt expense on the income statement was $5,000, and bad debts for tax reporting was $2,000. the enacted tax rate is 40%. which of the following entries will be included in the journal entry to record income tax at year-end? (select all that apply.) multiple select question.

a. credit income taxes payable $33,200.
b. debit income tax expense $41,200.
c. debit deferred tax asset $1,200.
d. credit income taxes payable $40,000.
e. credit deferred tax liability $8,000.

Answer 1

The journal entries to record income tax at year-end for Newberry Corp. would be: Debit Income Tax Expense $41,200, Credit Deferred Tax Liability $8,000, and Credit Income Taxes Payable $33,200.

Step-by-step explanation:

To record income tax at year-end for Newberry Corp., we need to consider the tax depreciation in excess of financial accounting depreciation and the bad debt expenses. Here are the journal entries:

1. Debit Income Tax Expense $41,200
2. Credit Deferred Tax Liability $8,000
3. Credit Income Taxes Payable $33,200

1. The tax depreciation in excess of financial accounting depreciation ($20,000) is added to the pretax accounting income ($100,000) to get the taxable income ($120,000).

2. The taxable income ($120,000) is multiplied by the enacted tax rate (40%) to calculate the income tax expense ($48,000).

3. The difference between the bad debt expense on the income statement ($5,000) and the bad debts for tax reporting ($2,000) is added to the income tax expense to get the final income tax expense ($41,200).

4. The deferred tax liability is calculated as the difference between the income tax expense ($41,200) and the income taxes payable (tax payable -50,000*40%= $20,000), which is $8,000.

5. The income taxes payable is calculated as the difference between the income tax expense ($41,200) and the deferred tax liability ($8,000), which is $33,200.