The adjusting entry to recognize income taxes due on a profit of $100,000 and a tax rate of 40% is:
A) A Above.
B) B Above.
C) C Above.
D) D Above.

Question

Quizplus · Accepted Answer

The adjusting entry to recognize income taxes due on a profit of $100,000 and a tax rate of 40% will be to debit Income Tax Expense for $40,000 and credit Income Tax Payable for $40,000. Option A reflects this entry. Option B is incorrect because it only debits Income Tax Expense without recognizing the liability in Income Tax Payable. Option C is incorrect because it debits Income Tax Payable instead of Income Tax Expense. Option D is also incorrect because it doesn't recognize the liability in Income Tax Payable, thus violating the matching principle.

The Adjusting Entry to Recognize Income Taxes Due on a Profit