Kara Fashions uses straight-line depreciation for financial statement reporting
ID: 2535102 • Letter: K
Question
Kara Fashions uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. Three years after its purchase, one of Kara's buildings has a book value of $470,000 and a tax basis of $320,000. There were no other temporary differences and no permanent differences. Taxable income was $6 million and Kara's tax rate is 35%. What is the deferred tax liability to be reported in the balance sheet? Assuming that the deferred tax liability balance was $43,000 the previous year, prepare the appropriate journal entry to record income taxes this year. Complete this question by entering your answers in the tabs below eneral Balance Sheet Journal Assume that the deferred tax liability balance was $43,000 the previous year. Prepare the appropriate journal entry to record income taxes this year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.) View transaction list Journal entry worksheet Record income tax expense Note: Enter debits before credits. Event General Journal Debit Credit ncome tax expense eferred tax liability Income tax payable 2,100,000Explanation / Answer
The Above will result in timing Difference.
Timing Differences are those which can be reversed in subseqent periods.
Income Tax Expense a/c Dr $ 20,57,000
Deferred Tax Liability a/c Dr $ 43,000
To Income Tax Payable a/c Cr $ 21,00,000
($6 Million x 35%)
( Being Entry Passed for Tax Expense and Timing Difference Adjusted through Deferred Tax Liabilty)
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.