Question

Sera Corporation has made and recorded its quarterly income tax payments. After a final review of taxes for the year, the company identifies an additional \(40,000 of income tax expense that should be recorded. A portion of this additional expense, \)6,000, is deferred for payment in future years. Record Sera’s yearend adjusting entry for income tax expense.

Short answer

The deferred income tax liability account is credited with $6,000.

Step-by-step solution

Definition of deferred income tax liability

A deferred income tax liability is a tax liability that is paid for a future tax.

Adjusting entry

Date	Particulars	Debit	Credit
	Income Taxes Expense	$40,000
	Income Taxes Payable		$34,000
	Deferred Income Tax Liability		$6,000
	(To record the adjusting entry)

The above entry is passed to make the adjustment of the deferred income tax liability of $6,000.