Deferred Tax Liability On January 1, the company By December ahurchased investme

Question

Deferred Tax Liability On January 1, the company By December ahurchased investment securities for $1,000. The securities are classified as securities had a fair value of $ 1,800 but had not yet been sold. Excluding the $10,000. Assume that there are no other book-tax Practice 16-5 investment trading securities, income before taxes for the year was differences The income tax rate is 35% for the current year a entries necessary to record income tax expense for t nd all future years. Prepare the journal entry or he year

Explanation / Answer

Unrealised Gain on trading securities = 1800- 1000 = 800

Accounting Income Including unrealised gain before tax = 10000+800

              = 10800

Date Account Debit credit Income tax expense [10800*.35] 3780 Deferred tax liability 280 Income tax payable [10000*.35] 3500

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