Shane Company Uses an Accelerated Depreciation Method for Income Tax

question 15

Multiple Choice

Shane Company uses an accelerated depreciation method for income tax purposes and the straight-line depreciation method for financial reporting purposes. As of December 31, 2014, Shane has a deferred tax liability balance related to depreciation temporary differences of $80,000. In 2015, depreciation for income tax purposes was $360,000, while depreciation for financial reporting purposes was $300,000. If the income tax rate is 30%, no other temporary or permanent differences exist, and taxable income is $400,000, the entry to record income tax expense on December 31, 2015, would include a

• A) debit to Income Tax Expense for $138,000
• B) credit to Income Taxes Payable for $138,000
• C) debit to Deferred Tax Asset for $120,000
• D) credit to Deferred Tax Liability for $120,000

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