Income Tax Accounting Financial reporting and tax reporting summary: Income before tax $300,000 x 40% rate $120,000 Taxable income $100,000 x 40% rate $40,000 Dat Description Debit Credit 1st Yr. Income Tax Expense 120.000 Income Tax Payable 40.000 Deferred Income Tax Payable 80.000 Income tax allocation due to timing differences 2nd Yr. Deferred Income Tax Payable 48,000 Income Tax Payable 48,000 Record $48, 000 of deferred tax as payable. c12-6
C12 - 6 Date Description Debit Credit Income Tax Accounting Income Tax Expense 120,000 Income Tax Payable 40,000 Deferred Income Tax Payable 80,000 Deferred Income Tax Payable 48,000 Income Tax Payable 48,000 1st Yr. Income tax allocation due to timing differences. Financial reporting and tax reporting summary: Income before tax $300,000 x 40% rate = $120,000 Taxable income $100,000 x 40% rate = $40,000 Record $48,000 of deferred tax as payable. 2nd Yr
Income Tax Accounting Financial reporting and tax reporting summary: Income before tax $300,000 x 40% rate $120,000 Taxable income $100,000 x 40% rate $40,000 Date Description Debit Credit 1st Yr. Income Tax Expense 120.000 Income Tax Payable 40.000 Deferred Income Tax Payable 80.000 The income tax expense is deducted from the income before tax reported on the income statement c12-7
C12 - 7 Date Description Debit Credit Income Tax Accounting Financial reporting and tax reporting summary: Income before tax $300,000 x 40% rate = $120,000 Taxable income $100,000 x 40% rate = $40,000 Income Tax Expense 120,000 Income Tax Payable 40,000 Deferred Income Tax Payable 80,000 The income tax expense is deducted from the income before tax reported on the income statement. 1st Yr
Income Tax Accounting Financial reporting and tax reporting summary: Income before tax $300,000 x 40% rate $120,000 Taxable income $100,000 x 40% rate $40,000 Date Description Debit Credit 1st Yr. Income Tax Expense 120,000 Income Tax Payable 40.000 Deferred Income Tax Payable 80.000 The income tax payable is based on the taxable income and is a current liability due and payable. c128
C12 - 8 Date Description Debit Credit Income Tax Accounting Financial reporting and tax reporting summary: Income before tax $300,000 x 40% rate = $120,000 Taxable income $100,000 x 40% rate = $40,000 Income Tax Expense 120,000 Income Tax Payable 40,000 Deferred Income Tax Payable 80,000 The income tax payable is based on the taxable income and is a current liability due and payable. 1st Yr
Income Tax Accounting Financial reporting and tax reporting summary: Income before tax $300,000 x 40% rate $120,000 Taxable income $100,000 x 40% rate $40,000 Dat Description Debit Credit 1st Yr. Income Tax Expense 120.000 Income Tax Payable In 000 Deferred Income Tax Payable 80.000 The deferred income tax payable is a deferred liability due later as the timing differences reverse and the taxes become due c12-9
C12 - 9 Date Description Debit Credit Income Tax Accounting Financial reporting and tax reporting summary: Income before tax $300,000 x 40% rate = $120,000 Taxable income $100,000 x 40% rate = $40,000 Income Tax Expense 120,000 Income Tax Payable 40,000 Deferred Income Tax Payable 80,000 The deferred income tax payable is a deferred liability due later as the timing differences reverse and the taxes become due. 1st Yr
Unusual Income statement Items Three types of unusual items are 1. Results of discontinued operations 2. Extraordinary items of gain or loss. 3. A change from one generally accepted accounting principle to another. These items and the related tax effects are reported separately in the income statement. c12-10
C12 - 10 Unusual Income Statement Items Three types of unusual items are: 1. Results of discontinued operations. 2. Extraordinary items of gain or loss. 3. A change from one generally accepted accounting principle to another. These items and the related tax effects are reported separately in the income statement