The Oliver Company earned taxable income of $7,500 during 2007, its first year of operations. A reconciliation of pretax financial income and taxable income indicated that an additional $2,500 of accelerated depreciation was deducted for tax purposes and that an estimated expense of $5,800 was deducted for financial reporting purposes. The estimated expense is not expected to be deductible for tax purposes until 2010, when the liability is paid. The current tax rate is 30% and no change in the tax rate has been enacted for future years. The resulting journal entry for 2007 would be:
|
a |
Income Tax Expense |
1,260 |
|
Deferred Tax Asset |
1,740 |
|
|
Deferred Tax Liability |
750 |
|
|
Income Taxes Payable |
2,250 |
|
|
b |
Income Tax Expense |
1,260 |
|
Deferred Tax Asset |
990 |
|
|
Income Taxes Payable |
2,250 |
|
|
c |
Income Tax Expense |
3,240 |
|
Deferred Tax Liability |
990 |
|
|
Income Taxes Payable |
2,250 |
|
|
d |
Income Tax Expense |
3,000 |
|
Deferred Tax Liability |
750 |
|
|
Income Taxes Payable |
2,250 |