Deferred tax liability to be reported in balance sheet

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Reference no: EM131202319

Kara Fashions uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. Three years after its purchase, one of Kara’s buildings has a book value of $370,000 and a tax basis of $245,000. There were no other temporary differences and no permanent differences. Taxable income was $6 million and Kara’s tax rate is 35%.

What is the deferred tax liability to be reported in the balance sheet?

Assume that the deferred tax liability balance was $34,850 the previous year. Prepare the appropriate journal entry to record income taxes this year.

Reference no: EM131202319

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