On December 31, 2015, Fredericksburg, Inc. had no temporary differences that created deferred income taxes. On January
Question:
On December 31, 2015, Fredericksburg, Inc. had no temporary differences that created deferred income taxes. On January 2, 2016, a new machine was purchased for $30,000. Straight-line depreciation over a four-year life (no residual value) was used for financial accounting. Depreciation expense for tax purposes was $11,000 in 2016, $9,000 in 2017, $6,000 in 2018, and $4,000 in 2019. In each year, the income tax rate was 20% and Fredericksburg had no other items that created differences between pretax financial income and taxable income. Fredericksburg reported the following pretax financial income for 2016 through 2019:
2016 $50,000
2017 $40,000
2018 $30,000
2019 $60,000
The entry to record income taxes on December 31, 2017, would include a
credit to Income Taxes Payable for $8,000.
debit to Income Tax Expense for $7,700.
debit to Deferred Tax Liability for $300.
credit to Deferred Tax Liability for $300.