Computation of Deferred Taxes
What is the required tax entry at the end of 1996?
Since the taxable income is known the tax payable can be calculated directly:
Taxable income $400,00 times rate (.3) =$120,000 tax payable
As calculated previously there is a required ending balance in the deferred tax asset account of $12,200. There is a required ending balance of $77,000 in the deferred tax liability account.
- Refer to the beginning balance in these respective accounts and adjust the balance to the required ending balance.
- DTA ending $12,200 - 0 = change (debit) $12,200
- DTL ending $77,000 - 0 = change (credit) $77,000