Libby_7e_MBA_Companion_Solutions

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Unformatted text preview: 59,500 59,500 59,500 0 3,502 (3,502) S E-6 Accounting for a deferred tax liability Refer to your answer for S E-5. Provide the journal entries to record income tax expense for financial reporting purposes at the end of each fiscal year (2010 – 2012). ANSWER 2010 Income tax expense (+E, –SE) 59,500 Income tax payable to IRS (+L) Assets = Liabilities 59,500 + Stockholders’ Equity Income tax payable to IRS +59,500 2011 Income tax expense (+E, –SE) Income tax expense (+E) –59,500 59,500 Deferred tax liability (+L) Income tax payable to IRS (+L) Assets 3,502 55,998 = Liabilities + Stockholders’ Equity Income tax payable to IRS +55,998 Income tax expense (+E) –59,500 Deferred tax liability +3,502 2012 Income tax expense (+E, –SE) 59,500 Deferred tax liability (–L) 3,502 Income tax payable to IRS (+L) Assets = Liabilities 63,002 + Stockholders’ Equity Income tax payable to IRS +63,002 Deferred tax liability –3,502 Page 7 of 21 Income tax expense (+E) –59,500 END-OF-CHAPTER MATERIAL LO 4 S E-7 Using a company’s effective tax rate Below is information from Amazon’s 2009 income tax footnote: Reconciliation of Amazon’s statutory and effective tax rates Year Ended December 31, 2009 2008 2007 Federal statutory tax rate 35.0% 35.0% 35.0% State taxes, net of federal impact 1...
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