Question

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Accounting Income BeforeIncome Taxes$1,000,000PermanentDifferences-Income Items Includedin the above Accounting Income Before Income Taxes Which Are Not Taxable$100,000underthe Income ax rulesTimingDifferences:Corporationuses accelerated depreciationmethodsfor income tax purposesFor 2014incometaxdepreciationexpenseusing the accelerated method was greater thanaccounting (book) depreciation expense by$100,000

Require Journal entries, Ledger, Income statement, Balance sheet.

Answer 1

Dear student, only journal entry for income tax expense, income taxes payable, & deferred incometaxes payble possible from above data.

The journal entries are as follows :-

In case of permanent diffrences in accounting income and income as per IRS, no differed tax assets or liabilites are involved. The amount of tax expense and tax liability recorded in a company's income statement and balance sheet is based on book income, plus or minus any permanent differences.

For temporary differences like differrence in the amount of depreciation for income tax purposes and book depreciation, deferred tax asset or deferred tax liability is recorded depending upon whether depreciation for income tax purposes is greater than book depreciation or is lesser than book depreciation.

The following journal entry will be prepared to record income tax expense and income taxes payble under Gaap:

Account Titles	Debit	Credit
Income tax expense ($1,000,000 - $100,000) x 35%	315,000
Income tax payable ($1,000,000 - $100,000 - $100,000) x 35%		280,000
Deferred tax liability ($100,000 x 35%)		35,000