Question

Gaslamp Corp. reports pretax accounting income of $204,000, but due to a single temporary difference, taxable income is only $152,000. At the beginning of the year, no temporary differences existed. Gaslamp is subject to a tax rate of 25%. The journal entry to record Gaslamp Corp.'s income taxes would include:

Answer 1

Journal entry

General Journal Debit Credit

Income Tax Expense $81,600

To deferred tax Liability(204000-152000)x40% $20800

To Income Tax Payable (152000*40%) $60,800

(Being Income tax expense recorded)