The Banin Company was established in 2016. During this year it purchased one asset with five...
The Banin Company was established in 2016. During this year it purchased one asset with five years of useful life. The asset is depreciated based on a straight-line method for financial reporting, and based on an (unspecified) accelerated method for tax reporting. In 2017, the Banin Company was fined $20,000 for unsportsmanlike conduct. The fine is not deductible for tax purposes. There were no other differences between financial and tax reporting over the years. Required: a. Assume the pretax financial income (based on GAAP) in 2016 was $160,000, the taxable income for 2016 (based on the tax code) was $100,000, and the tax rate was 30%. Provide the journal entry to record the income tax expense for 2016.
Homework Answers
| Date | Account title | Debit | credit |
| 2016 | Income tax expense (160000*30%) | 48000 | |
| Deferred tax liability | 18000 | ||
| Income tax payable (100000*30%) | 30000 | ||
| [Being income tax expense for 2016 recorded] |
**since Fine is imposed in year 2017 ,the only difference between financial income and taxable income is due to depreciation which is temporary difference.
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