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Journal Entry to Record Income Tax

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(Two Temporary Differences, One Rate, Beginning Deferred Taxes) The following facts
related to Krung The Corporation.

1) Deferred tax liability, January 1, 2007, $40,000
2) Deferred tax asset, January 1, 2007, $0
3) Taxable income for 2007, $95,000
4) Pretax financial income for 2007, $200,000
5) Cumulative temporary difference at December 31, 2007, giving rise to future taxable
amounts, $240,000
6) Cumulative temporary difference at Dec 31, 2007, giving rise to future deductible'
amounts, $35,000
7) Tax rate for all years 40%
8) The company is expected to operate profitable in the future.

a) Compute income tax payable

b) Prepare journal entry to record income tax expense deferred income taxes
income taxes, and income taxes payable for 2007

c) Prepare the income tax expense section of the income statement for 2007,
beginning with the line "Income before income taxes."

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Solution Summary

Journal entry to record income tax is examined. The tax payable are computed.

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(Three Differences, compute Taxable Income, Entry for Taxes) Zurich Company reports pretax financial
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