Onyx Company's Income Statement Shows Net Income Before Income Tax

question 46

Multiple Choice

Onyx Company's income statement shows net income before income tax of $38,000. The company's tax return shows taxable income of $34,000. Company's tax rate is 40%. Which of the following entries would be used to record tax expense and tax payable?

• A) Debit Income tax expense $15,200 and credit Cash $15,200.
• B) Debit Deferred tax liability $13,600 and credit Income tax payable $13,600.
• C) Debit Income tax expense $15,200, credit Deferred tax liability $1,600 and credit Income tax payable $13,600.
• D) Debit Deferred tax liability $1,600, debit Income tax expense $13,600 and credit Income tax payable $15,200.

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Definitions:

Perfectly Competitive Firm

A company that operates in a market where there are many buyers and sellers, no barriers to entry, and the product is homogeneous, leading to no control over price by individual firms.

Market Price

The contemporary selling or buying price for an asset or service.

Profit-Maximizing

The process of adjusting production and sale strategies to achieve the highest possible profit under given conditions.

Incur A Loss

The situation in which the costs of operating a business exceed the revenues, leading to negative profits.