Kara fashions uses straight-line depreciation for

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Kara Fashions uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. Three years after its purchase, one of Kara's buildings has a carrying value of $400,000 and a tax basis of $300,000. There were no other temporary differences and no permanent differences. Taxable income was $4 million and Kara's tax rate is 40%.

1.What is the deferred tax liability to be reported in the balance sheet? (Enter your answer in whole dollars.)

2.Assume that the deferred tax liability balance was $32,000 the previous year. Prepare the appropriate journal entry to record income taxes this year.

Reference no: EM13593215

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