Chapter 16, Problem 16.4E

To determine

Temporary Difference

The amount of difference between the pre-tax accounting income and taxable income, and the difference between the amount of assets and liabilities reported in the financial reports and the amount of assets and liabilities as per the company’s tax records, is referred as temporary difference.

Deferred tax asset

When the Income Tax Expense account is more than the Income Tax Payable account, this difference is known as Deferred Tax Asset.

To prepare: The journal entry to record income taxes for 2016.