Kent Wesley is a junior member of the external audit team hired to audit Aldridge Inc.'s Year
Question:
Kent Wesley is a junior member of the external audit team hired to audit Aldridge Inc.'s Year 2 financial statements. Kent has been tasked with reviewing differences related to Aldridge's financial statements versus its tax forms from Year 1 in order to prepare for the Year 2 audit. After reading through the workpapers gathered from the company's financial reporting group, Wesley prepares notes shown in the exhibit to discuss with his manager.
Use the information contained in the exhibit to fill out the tables below. Select the answers from the option lists provided.
1. For each of the items listed above, populate the table below:
ABC1Item
Temporary or
Permanent Difference
Deferred Tax Asset
(DTA) or Deferred Tax
Liability (DTL)
2Depreciation
3Life insurance payout
4Fine to the IRS
5Royalties received
6Bad debt expense
2. What is the journal entry associated with the transactions above for Year 1?
Account Name
Debit
Credit
Income Tax Expense
Change in DTA
Change in DTL
Income Tax Payable
3. What is the journal entry associated with the transactions above for Year 2?
Account Name
Debit
Credit
Income Tax Expense
Change in DTA
Change in DTL
Income Tax Payable