Question

He following information is for James Industries' first year of operations. Amounts are in millions of dollars.

Year Future Taxable Amounts Future Amounts Total
2020 2021 2022 2023 2024
Accounting income $90
Temporary difference:
Advance rent payment (24 ) $6.00 $6.00 $6.00 $6.00 $24.00
Taxable income $66

In 2021 the company's pretax accounting income was $76.0. The enacted tax rate for 2020 and 2021 is 25%, and it is 30% for years after 2021.

Required:
Prepare a journal entry to record the income tax expense for the year 2021.

Answer 1

Date Account Title Debit Credit

December 2021 Income tax expense $19,000,000

Deferred tax liability $1,500,000

Income tax payable $20,500,000

Step-by-step explanation:

Amounts are in millions of dollars so convert them.

Income tax expense for 2021 is:

= Accounting income * tax rate

= 76,000,000 * 25%

= $19,000,000

Deferred tax liability for 2021 is:

= Advance rent payment for 2021 * 25%

= 6,000,000 * 25%

= $1,500,000