Accounting Help True or False question ?

The income before income tax reported on the income statement for the year was $450,000, and because of temporary differences in accounting and tax methods, the taxable income for the same year was $400,000. If the income tax rate is 40%, the amount of income tax expense to be reported on the income statement is $160,000.Accounting Help True or False question ?
False. Since those differences are temporary differences, the tax expense is $180,000, and you recognise the deferred tax liability. The entry:


Dr Income tax expense $180,000


Cr Income tax payable $160,000


Cr Deferred income taxes $20,000Accounting Help True or False question ?
True. If the company is on the accrual basis, then it doesn't matter what the difference in net income is- it matters what they will eventually pay in taxes. That's the liability and corresponding expense.

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