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@Tom-nn5wd
Жыл бұрын
I’m confused as to why a tax liability would be booked if depreciation wasn’t booked.
@Tom-nn5wd
Күн бұрын
Because In the year of error, the client didn’t book depreciation of 10k, but they did for tax. As a result, they had a book tax difference of 10,000 which when multiplied by the tax rate cause income tax expense to be higher than it should have been by 2k. Because of this, we have a DTL of 2,000 on the books, 10,000 of missing book depreciation, and 2,000 of additional income tax expense. The fix to this would be to DR. RE by 8k (10,000 of missing depreciation - 2,000 of income tax expense that should not have been recorded) Dr. to DTL to get it off the books since it should not have ever been recorded, and A/D of 10,000 since depreciation should have been recorded in this amount. Hope this helps
@africasbest1663
Жыл бұрын
Adam wouldn’t have recorded a deferred Tax liability of 2,000. Since since he was making an error, he would have recorded an Income tax Expense of 20,000 and an income tax Payable for 20,000.
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