Question

As of December 31, 2020 $ 13,000. As of December 31, 2021 $ 25,000The enacted tax rate was 25% for 2020 and thereafter.What should be the balance in Kent's deferred tax liability account as of December 31, 2021?

Answer 1

$3,000

Explanation:

The computation of the balance in Kent deferred tax liability is shown below:

= {(December 31 2021) × (enacted tax rate)} - {(December 31 2020) × (Enacted tax rate)}

= {($25,000 × 25%) - ($13,000 × 25%)}

= $6,250 - $3,250

= $3,000

Along with the journal entry is also shown for better understanding

Income tax expense $41,500

To Deferred tax liability $3,000

To Income tax payable $38,250 ($153,000 × 25%)

(Being the income tax expense is recorded)

We debited the income tax expense as it increases the expenses account and on other side we credited the other two accounts as these are also increased