A company reports pretax accounting income of $10 million, but because of a single temporary difference, taxable income is only $7 million. No temporary differences existed at the beginning of the year, and the tax rate is 40%.

Prepare the appropriate journal entry to record income taxes. (If no entry is required for a particular event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i. e., 5,500,000 should be entered as 5.5).)

Question

Business

Talia Mcintosh

26 May, 07:10

A company reports pretax accounting income of $10 million, but because of a single temporary difference, taxable income is only $7 million. No temporary differences existed at the beginning of the year, and the tax rate is 40%.

Prepare the appropriate journal entry to record income taxes. (If no entry is required for a particular event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i. e., 5,500,000 should be entered as 5.5).)

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Answers (1)

Know the Answer?

Cortez Wagner · Answer 1

Consider the following analysis.

Explanation:

Journal Entries

Income tax expense ... $4,0000,000 Deferred tax liability (10 million - 7 million) * 40% ... $1,200,00 Income tax payable (7 million * 40%) ... $2,800,000

Using decimals is 4.0, 1.2, and 2.8.