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Question 4 A company has a temporary difference due to depreciation. For fiscal year 2012, its Income Tax Expense is $15,000 and its Taxable Income is $100,000. The statutory tax rate is 35% What is the correct journal entry for recording 2012 Income Tax Expense and Income Tax Payable

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Answer:

Total income tax expense during the year is $15,000.

Statutory tax = 35% rate ($10,000*35% = $3,500).

Remaining part $11,500 ($15,000 - $3,500) would be the deferred tax liability.

Date   Accounts titles & Explanation        Debit       Credit

           Income tax expense                      $15,000

                 Deferred tax liabilities                               $11,500

                 Income tax payable                                   $3,500

           (To record income tax obligations)

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