Question

Simpson Inc. had a balance in the Deferred Tax Liability account of $420 on December 31, 2015, resulting from depreciation temporary differences. Differences in tax and accounting depreciation for assets purchased on January 1, 2015 is as follows: YEAR FINANCIAL DEPRECIATION TAX DEPRECIATION 2015 $2,000 $3,400 2016 $2,000 2,600 2017 $2,000 1,200 2018 $2,000 800 $8,000 $8,000 In addition to the 2016 depreciation temporary difference, Simpson expensed $1,000 of warranty costs that will be deducted for tax purposes when paid in future years. Simpson’s taxable income in 2016 was $20,000. The 2016 income tax rate was 30% and no change in tax rate for future years have been enacted.REQUIRED: Prepare the income tax journal entry for Simpson Inc. for December 31, 2016.

Answer 1

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Step-by-step explanation:

Companies and businesses most of the time record income tax expenditure in the debit entry and income tax payable as a credit entry in journal entries. So far as companies and businesses utilizes the same cash technique or method of accounting for both tax and financial reporting, the finished journal entries is expected to include an equal debit and credit to income tax expenditure and income tax payable, respectively.

The below attached image contains the journal entry solution to the question above.