Kara Fashions uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. Three years after its purchase, one of Kara’s buildings has a book value of $400,000 and a tax basis of $300,000. There were no other temporary differences and no permanent differences. Taxable income was $4 million and Kara’s tax rate is 25%. What is the deferred tax liability to be reported in the balance sheet? Assuming that the deferred tax liability balance was $20,000 the previous year, prepare the appropriate journal entry to record income taxes this year.

A. Credit $5,000

B. Dr Income tax expense $1,005,000

Cr Income tax pay$1,000,000

Cr Deferred tax liability $5,000

Explanation:

Calculation for What is the deferred tax liability to be reported in the balance sheet

Deferred tax liability=[ (400,000-300,000)*.25]-20,000

Deferred tax liability=($100,000*.25)-$20,000

Deferred tax liability=$25,000-$20,000

Deferred tax liability=$5,000 Credit

Therefore the deferred tax liability to be reported in the balance sheet will be $5,000 Credit

B. Preparation of the appropriate journal entry to record income taxes this year.

Dr Income tax expense $1,005,000

Cr Income tax pay$1,000,000

(4million *.25)

Cr Deferred tax liability $5,000

according to the song of roland, the characteristics of an ideal knight are: loyalty to the king, skilled warriors and horseman, valiant, bold, courageous, strong and proud in battle. they should be determined to fulfil their duties and willing to die to make their people safe.

answer; post closing trial balance;