Refer to RE19-1. Assume that Frankfort's taxable income for Year 1 is $300,000. Prepare the journal entry to record Frankfort Company's income tax expense.
In RE19-1, Frankfort Company identifies depreciation as the only difference for future taxable amounts. In Year 1, its depreciation for financial reporting purposes is $3,500 and $5,000 for income tax reporting purposes. Frankfort Company has an income tax rate of 35%. Explain whether this is a deferred tax asset or deferred tax liability, and calculate the amount.