In Its First Year of Operations, Lear Company Reported Financial

question 69

Multiple Choice

In its first year of operations, Lear Company reported financial statement income (prior to income tax expense) of $100,000.In the same year, Lear Company reported $80,000 of taxable income, the difference being due to temporary differences.Assuming the enacted tax rate for the current year and all future years is 30%, what is Lear's current year adjustment for deferred income taxes?

• A)Debit to Deferred Income Tax Liability for $6,000
• B)Debit to Income Tax Expense for $6,000
• C)Credit to Income Taxes Payable for $6,000
• D)Credit to Deferred Income Tax Liability for $6,000
• E)Credit to Income Tax Expense for $6,000

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Definitions:

Expenditures

The act of spending or disbursing money, often related to business or government transactions.

Substantial Control

Significant influence or decision-making power over the management and operational policies of an entity, typically through ownership, contractual agreements, or other means.

Employee

An individual who is hired and paid by an employer to perform specific tasks or services.

Lawful Purpose

A requirement for contracts and actions to be valid, indicating that their intentions are not illegal or against public policy.