Typical Corp

question 110

Essay

Typical Corp. reported a deferred tax liability of $6,000,000 for the year ended December 31, 2012, when the tax rate was 40%. The deferred tax liability was related to a temporary difference of $15,000,000 caused by an installment sale in 2012. The temporary difference is expected to reverse in 2014 when the income deferred from taxation will become taxable. There are no other temporary differences. Assume a new tax law passed in 2013 and the tax rate, which will remain at 40% through December 31, 2013, will become 48% for tax years beginning after December 31, 2013. Pretax accounting income and taxable income for the year 2013 is $30,000,000.
Required:
Prepare a compound journal entry to record Typical's income tax expense for the year 2013. Show well-labeled computations.

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Definitions:

Everyday Lives

The daily experiences and routines that constitute an individual's normal existence, often studied to understand societal norms and behaviors.

Ethnomethodology

A sociological perspective that examines how people use everyday, commonsense understandings to make sense of life and navigate the social world.

Methods

Systematic approaches or techniques used to conduct research, gather data, or solve problems within various fields of study.

Daily Life

Encompasses the routine activities, habits, and practices that individuals engage in on a day-to-day basis.