Question

Haag Corp.'s 2021 income statement showed pretax accounting income of $2,500,000. To compute the federal income tax liability, the following 2021 data are provided:

Income from exempt municipal bonds                                             $  100,000

Depreciation deducted for tax purposes in excess of depreciation

      deducted for financial statement purposes                                    200,000

Estimated federal income tax payments made                                    330,000

Enacted corporate income tax rate                                                          20%

        Prepare the accounting entry on Haag Corp’s books for 2021

Answer 1

		Amount in $
	Pretax Accounting Income	2,500,000
	Less: Income from exempt municipal bonds	100,000
	Less: Excess depreciation under income tax	200,000
	Taxable Income	2,200,000
	x Tax rate	20%
	Total Tax liability	440,000
	Less: Estimated federal income tax payments	330,000
	Net Tax payable	110,000
	Account Titles & Explanation	Debit $	Credit $
	Income Tax Expense	480,000
	Income Tax payable		440,000
	Deferred Tax Liability ( 200,000 x 20% )		40,000
	( To record the Tax liaibility & deferred tax liability)