Question

Compute income taxes payable for 2020 began 2020 with a $47,840 balance in the Deferred Tax Liability account. At the end of 2020, the related cumulative temporary difference amounts to $364,000, and it will reverse evenly over the next 2 years. Pretax accounting income for 2020 is $546,000, the tax rate for all years is 20%, and taxable income for 2020 is $421,200.Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020.

Answer 1

Dr Income tax expense 109,200

Cr Income tax payable 84,240

Cr Deferred tax liability 24,960

Step-by-step explanation:

first we must determine:

income taxes payable = taxable income x current tax rate = $421,200 x 20% = $84,240

income tax expense = pretax accounting income x current tax rate = $546,000 x 20% = $109,200

deferred tax liability = income tax expense - income tax payable = $109,200 - $84,240 = $24,960

now the journal entry:

Dr Income tax expense 109,200

Cr Income tax payable 84,240

Cr Deferred tax liability 24,960