The following differences enter into the reconciliation of financial income and taxable income of Hatley Company for the year ended December 31, 2018. The enacted income tax rate is 40% for all years.

Excess tax depreciation……………………………………………………….. 100,000

Litigation accrual ………………………………………………………………. 50,000

Unearned rent revenue ………………………………………………………. 120,000

1. Excess tax depreciation will reverse equally over the next four years.

2. It is estimated that the litigation liability will be paid in 2022

3. Rent revenue will be recognized on 12/31/2020

4. Taxable income (income for tax purposes) as of 12/31/2018 is $450,000

5. Deferred tax assets as of 12/31/2017 is $70,000

6. Deferred tax liability as of 12/31/2017 is $55,000

Prepare a journal entry on 12/31/2018 to record income tax expense for 2018 (do not forget to show work and circle your JE)

Answer rating: 100% (QA)

Deferred tax liability on excess depreciation 100000 40 40000 Deferred tax ass... View the full answer