At year end on August 31, 2020, Clutch Home Decor Inc. has accounting income (before income tax expense calculation) of $237,000. Write the journal entry to record the income tax expense in 2020, which will be paid in 2021. Assume the tax rate is 35% and that the income tax amount calculated under ASPE is the same as the amount calculated under tax laws. Do not enter dollar signs or commas in the input boxes. Date Account Title and Explanation Debit Credit Aug 31 To record the income tax expense for the year

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Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.