Fairfax Company had a balance in Deferred Tax Liability of $840 on December 31, 2016, resulting from depreciation timing differences. Differences in tax and accounting depreciation for assets purchased on January 1, 2016, are as follows: In addition to the 2016 depreciation timing difference, Fairfax Company expensed $2,000 of warranty costs that will be deducted for tax purposes when paid in future years. Fairfax's taxable income in 2016 was $35,000. The 2016 income tax rate was 35%, and no changes in the tax rate for future years have been enacted.
Required:
Prepare the income tax journal entry for the Fairfax Company for December 31, 2016.

Question

Fairfax Company had a balance in Deferred Tax Liability of $840 on December 31, 2016, resulting from depreciation timing differences. Differences in tax and accounting depreciation for assets purchased on January 1, 2016, are as follows:  In addition to the 2016 depreciation timing difference, Fairfax Company expensed $2,000 of warranty costs that will be deducted for tax purposes when paid in future years. Fairfax's taxable income in 2016 was $35,000. The 2016 income tax rate was 35%, and no changes in the tax rate for future years have been enacted.
Required:
Prepare the income tax journal entry for the Fairfax Company for December 31, 2016.

Quizplus · Accepted Answer

The Answer of Fairfax Company had a balance in Deferred Tax Liability of $840 on December 31, 2016, resulting from depreciation timing differences. Differences in tax and accounting depreciation for assets purchased on January 1, 2016, are as follows:  In addition to the 2016 depreciation timing difference, Fairfax Company expensed $2,000 of warranty costs that will be deducted for tax purposes when paid in future years. Fairfax's taxable income in 2016 was $35,000. The 2016 income tax rate was 35%, and no changes in the tax rate for future years have been enacted.
Required:
Prepare the income tax journal entry for the Fairfax Company for December 31, 2016.

Fairfax Company Had a Balance in Deferred Tax Liability of $840