Question

Lehman Corporation purchased a machine on January 2, 2017, for $4,000,000. The machine has an estimated 5-year life with no salvage value. The straight-line method of depreciation is being used for financial statement purposes and the following MACRS amount will be deducted for tax purposes:

2017 $800,000.          TAX RATE 30%

Assuming 2017 revenue is $2,500,000 please provide journal entry to record income tax expense, income tax payable and the deferred tax asset or liability.

Answer 1

Year	Account Tittle	Debit	Credit
$2,017.00	Income Tax Expense	$510,000.00
	Deferred Tax Liability/ Asset
	Income Tax Payable		$510,000.00

Computation of Taxable Income & income tax Payable
Revenue	$2,500,000.00
Less: Depreciaiton	$800,000.00
Taxable Icnome	$1,700,000.00
Incoem tax Payable ( 1700000*30%)	$510,000.00

Depreciaiton as per SLM= (4000000/5)=800000

Depreciation as per SLM and as per MACRS is same and there is no temporary difference . hence, there will not be any Deferred Tax Asset or Liability.