Compute income taxes payable for 2020 began 2020 with a $47,840 balance in the Deferred Tax Liability account. At the end of 2020, the related cumulative temporary difference amounts to $364,000, and it will reverse evenly over the next 2 years. Pretax accounting income for 2020 is $546,000, the tax rate for all years is 20%, and taxable income for 2020 is $421,200.Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020.

Dr Income tax expense 109,200

    Cr Income tax payable 84,240

    Cr Deferred tax liability 24,960

Explanation:

first we must determine:

income taxes payable = taxable income x current tax rate = $421,200 x 20% = $84,240

income tax expense = pretax accounting income x current tax rate = $546,000 x 20% = $109,200

deferred tax liability = income tax expense - income tax payable = $109,200 - $84,240 = $24,960

now the journal entry:

Dr Income tax expense 109,200

    Cr Income tax payable 84,240

    Cr Deferred tax liability 24,960