Please check my answer to be sure it is correct, thank you! A company reports pr
ID: 2562755 • Letter: P
Question
Please check my answer to be sure it is correct, thank you!
A company reports pretax accounting income of $8 million, but because of a single temporary difference, taxable income is only $5 million. No temporary differences existed at the beginning of the year, and the tax rate is 30%. Prepare the appropriate journal entry to record income taxes. (if no entry is required for a transaction/eventselect "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (ie, 5,500,000 should be entered as 5.5)) View transaction list View journal entry worksheet ® Event General Journal Debit Credit Income tax expense Deferred tax asset Income tax payable 09 15Explanation / Answer
Tax on Income = 5 x 30% = 1.5
As Taxable income < reporting income , deferred tax liability will occur
Deferred Tax Liability = 3 x 30% = 0.90
Particulars Debit Credit Income Tax Expense 1.5 Income Tax Payable 1.5 Profit and Loss 0.9 Deferred Tax Liability 0.9