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Question
On December 31, 2011, the Lilly Corporation reported a deferred tax liability totaling $12,000, resulting from depreciation timing differences pertaining to a depreciable asset purchased during 2011. Lilly uses straight-line depreciation over four years for GAAP (book) purposes; for tax purposes, the depreciation deduction is 40% of cost during 2011, 30% of cost during 2012, 20% of cost during 2013, and 10% of cost during 2014. During 2012, Lilly expensed $75,000 of warranty costs that will be deducted for tax purposes in future years. Lilly also accrued revenue totaling $150,000 which is taxable in 2013. Lilly's GAAP (book) income before taxes during 2012 totaled $397,700. The marginal income tax rate is 40% for all years.
Requirement:
Prepare the journal entry to record income tax expense for the year ended December 31, 2012.
Answer
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