Refer to RE18-1. Assume that Parker’s taxable income for Year 1 is $ 150,000. Prepare the journal entry to record Parker’s income tax expense.
In exercise
Parker Company identifies depreciation as the only difference for future taxable amounts. In Year 1, its depreciation for financial reporting purposes is $ 9,000 and $ 10,500 for income tax reporting purposes. Parker has an income tax rate of 35%. Explain whether this is a deferred tax asset or deferred tax liability, and calculate the amount.