In: Accounting
Company A reports pretax financial income of $100,000 for 2019. The following items caused taxable income to be different than pretax financial income.
Company A's tax rate is 25% for all years, and the company expects to report taxable income in all future years. There are no deferred taxes at the beginning of 2019.
Instructions:
Pretax Financial Income | $ 1,00,000 | ||
Less | Life Insurance on Key Officers | $ 5,000 | |
Less | Depreciation as per Tax Purpose | $ 25,000 | |
Add | Estimated warranty Liability | $ 20,000 | |
Taxable Income | $ 90,000 | ||
Income Tax Payable | $ 22,500 | ||
Income Tax Paid (100,000*25%) | $ 25,000 | ||
Deffered Tax | $ 2,500 | ||
Journal entries | |||
For Income Tax Expense & Income Tax Payable for 2019 | |||
Dr | Income Tax A/c | $ 22,500 | |
Cr | Income Tax Payable A/c | $ 22,500 | |
For Deffered Income Taxes | |||
Dr | Income Tax Payable A/c | $ 2,500 | |
Cr | Deffered Tax | $ 2,500 |