Fitzgerald Corp. reports pretax accounting income of $210,000, but because of a single temporary difference, taxable income is only $155,000. At the beginning of the year, no temporary differences existed. Fitzgerald is subject to a tax rate of 40%. Prepare the appropriate journal entry to record the company’s income tax expense for the year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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andromache andromache · Answer 1 · 2019-10-04T08:25:06+02:00

Answer:

Explanation:

The journal entry is shown below:

Income tax expense A/c Dr $40,000

Deferred tax liability A/c Dr ($210,000 - $155,000) × 40% = $22,000

To Income tax payable ($155,000 × 0.40) = $62,000

(Being income tax expense is recorded for the year)

The income tax expense amount is a balance figure which is computed by

= Income tax payable - Deferred tax liability

= $62,000 - $22,000

= $40,000