Question

Roberts Corp. reports pretax accounting income of $208,000, but due to a single temporary difference, taxable income is only $154,000. At the beginning of the year, no temporary differences existed. Roberts is subject to a tax rate of 25%. Required: Prepare the compound journal entry to record Roberts Corp.'s income taxes. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

The answer is given below;

Step-by-step explanation:

Temporary Difference $208,000-$154,000=$54,000

Taxable Temporary Difference=$54,000*25%=$13,500

Current Tax Expense =154,000*25%=$38,500

Please note that taxable temporary difference result in deferred tax expense and corresponding effect in deferred tax liability.

Deferred Tax Expense Dr.$13,500

Current Tax Expense Dr.$38,500

Deferred Tax liability Cr.$13,500

Current Tax Liability Cr.$38,500