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Recording and Reporting Temporary Difference On December 31, for GAAP purposes, Clubs Inc. reported a balance of $35,000 in Prepaid Maintenance Expense for services to
Recording and Reporting Temporary Difference On December 31, for GAAP purposes, Clubs Inc. reported a balance of $35,000 in Prepaid Maintenance Expense for services to be received over the following year. For tax purposes, however, prepaid costs are deducted when paid. Taxable income is $115,000 and the tax rate is 25%. Assume no other temporary differences or any beginning balances in deferred tax accounts. Required a. Record the income tax journal entry on December 31. Date Account Name Dec. 31 Income Tax Expense Deferred Tax Liability Dr. Cr. 0 0 0 0 0 0 Income Tax Payable To record income tax expense b. Prepare the income tax section of the income statement for the year and provide the disclosure of current and deferred tax expense. Note: Do not use negative signs with your answers. Partial Income Statement For the year ended December 31 Income before income taxes $ Income tax expense Net income 0 $ 0 $ 0 Financial Statement Disclosure Year 1 Current tax expense S Deferred tax expense $ 0 Total income tax expense S 0
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