Income tax journal entry for fairfax company

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Reference no: EM1310612

Fairfax Company had a balance in Deferred Tax Liability of $840 on December 31, 2014, resulting from depreciation timing differences. Differences in tax and accounting depreciation for assets purchased on January 1, 2014, are as follows:

	Financial	Tax
Year	Depreciation	Depreciation
2014	$ 4,000	$ 6,800
2015	4,000	5,200
2016	4,000	2,400
2017	4,000	1,600
Total	$16,000	$16,000

In addition to the 2014 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 2014 was $35,000. The 2014 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, 2014.

Reference no: EM1310612

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