Brief Exercise 19-3 Oxford Corp. began operations in 2017. Reported pretax finan

Question

Brief Exercise 19-3

Oxford Corp. began operations in 2017. Reported pretax financial income of $225,000 for the year. Tax depreciation exceeded book depreciation by $40,000. 2017 tax rate 30% and years thereafter. Assume this is Oxford's only difference between Oxford's pretax financial income and taxable income. Prepare journal entries to record the income tax expense, deferred income tax and income tax payable.

Also, show how the deferred tax liability should be classified on December 31, 2017 balance sheet.

Explanation / Answer

Answer

Temporary depreciation difference = $40000
Tax Rate 30%

Deferred Tax Expense = $40,000 x 30% = $12,000

General Journal

Debit

Credit

Income Tax Expenses

$          67,500.00

Income Tax Payable

$      55,500.00

Deferred Tax Liabilities

$     12,000.00

LIABILITIES & STOCKHOLDERS' EQUITY

Liabilities:

Deferred Tax Liabilities

$12,000

General Journal

Debit

Credit

Income Tax Expenses

$          67,500.00

Income Tax Payable

$      55,500.00

Deferred Tax Liabilities

$     12,000.00

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