Lynch Company began operations in 2019. The company reported $24,000 of depreciation expense on its income statement in 2019 and $26,000 in 2020. On its tax returns, Lynch deducted $32,000 for depreciation in 2019 and $37,000 in 2020. The 2020 tax return shows a tax obligation (liability) of $12,000 based on a 25% tax rate.

REQUIRED

a. Determine the temporary difference between the book value of depreciable assets and the tax basis of these assets at the end of 2019 and 2020.

b. Calculate the deferred tax liability for each year.

c. Calculate the income tax expense for 2020.

d. Prepare a journal entry to record income tax expense and post the entry to the appropriate T-accounts for 2020.