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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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In the current year, Madison Corporation had $50,000 of taxable income at a tax rate of 25%. During the year, Madison began offering warranties on its products and has a Warranty liability for financial reporting purposes of $5,000 at the end of the year. Warranty expenses are not deductible until paid for income tax purposes. Prepare the journal entry to record Madison’s income taxes at the end of the year.

To determine

Prepare journal to record the entry for income tax of Company M at the end of year.

Explanation

Income Tax Expenses: The expenses which are related to the taxable income of the individuals and business entities for an accounting period, and are recognized by them for the purpose of federal government and state government tax are called as income tax expenses.

Prepare journal to record the entry for income tax of Company M at the end of 2019:

DateAccount title and ExplanationPost ref. Amount
DebitCredit
 Income tax expense (balancing figure) $11,250 
 Deferred tax asset(2) $1,250 
     Income tax payable (1)  $12,500
 (To record the income tax payable )   

Table (2)

  • Income tax expense is an expense that decreases the stockholder’s equity and it is increased...

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