Prepare compound journal entry to record typical income tax

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Question - Typical Corp. reported a deferred tax liability of $5,700,000 for the year ended December 31, 2015, when the tax rate was 40%. The deferred tax liability was related to a temporary difference of $14,700,000 caused by an installment sale in 2015. The temporary difference is expected to reverse in 2017 when the income deferred from taxation will become taxable. There are no other temporary differences. Assume a new tax law passed in 2016 and the tax rate, which will remain at 40% through December 31, 2016, will become 47% for tax years beginning after December 31, 2016. Pretax accounting income and taxable income for the year 2016 is $27,000,000.

Required: Prepare a compound journal entry to record Typical's income tax expense for the year 2016.

Reference no: EM132106591

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