Oliver Company earned taxable income of $7,500 during 2019, 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 2022, 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 2019 would be:
Identify the appropriate journal entry for the transaction.
Deferred tax asset When the Income Tax Expense account is more than the Income Tax Payable account, this difference is known as Deferred Tax Asset.
Deferred tax liability When the Income Tax Expense account is less than the Income Tax Payable account, this difference is known as Deferred Tax Liability.
Prepare journal entry:
Date | Accounts title and explanation | Post Ref. | Debit | Credit |
2019 | Â | Â | Â | Â |
December 31 | Income tax payable | Â | $1,260 | Â |
 | Deferred tax asset (1) |  | $1,740 |  |
 | Deferred tax liability (2) |  |  | $750 |
 | Income taxes payable (3) |  |  | $2,250 |
 | (To record the income tax payable)   |  |  |  |
Table (2)
December 31, 2019: To record the income tax payable:
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