Final answer:
To record Gallo Light's 2024 income taxes, a journal entry is required. Gallo Light's 2024 net income can be calculated by subtracting the income tax expense from the pretax accounting income.
Step-by-step explanation:
To record Gallo Light's 2024 income taxes, we need to consider both the current tax rate and the future tax rate. The journal entry would be:
- Dr Income Tax Expense ([$837,000 - $300,000] * 25%)
Cr Income Tax Payable ([$837,000 - $300,000] * 25%) - Dr Income Tax Expense ($300,000 * 5%)
Cr Deferred Tax Liability ($300,000 * 5%)
Gallo Light's 2024 net income can be calculated by subtracting the income tax expense from the pretax accounting income:
Net Income = Pretax Accounting Income - Income Tax Expense
Net Income = $837,000 - [($837,000 - $300,000) * 0.25]