What is the journal entry required to recognize a deferred tax asset of $50,000? Dr. Deferred Tax Asset $50,000, Cr. Income Tax Benefit $50,000 Dr. Deferred Tax Asset $50,000, Cr. Equity $50,000 Dr. Income Tax Expense $50,000, Cr. Deferred Tax Asset $50,000 Dr. Deferred Tax Asset $50,000, Cr. Deferred Tax Liability $50,000

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Business

Myla Davis

8 February, 02:40

What is the journal entry required to recognize a deferred tax asset of $50,000? Dr. Deferred Tax Asset $50,000, Cr. Income Tax Benefit $50,000 Dr. Deferred Tax Asset $50,000, Cr. Equity $50,000 Dr. Income Tax Expense $50,000, Cr. Deferred Tax Asset $50,000 Dr. Deferred Tax Asset $50,000, Cr. Deferred Tax Liability $50,000

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Bernard Shepard · Answer 1

Dr. Deferred Tax Asset $50,000, Cr. Income Tax Benefit $50,000

Explanation:

A deferred tax asset is an asset created as a result of overpayment or advance payment of taxes. It is the opposite of a deferred tax liability, which represents income taxes owed that will be settled in the future. Deferred tax assets and liabilities usually result from the differences between the accounting and tax systems of recognition of transactions. One of such is depreciation.

When a deferred tax asset is to be recognized,

Debit Deferred Tax Asset

Credit Income Tax Benefit

Recall, deferred tax asset is an advance payment of income tax.