The deferred tax asset account decreased by $120,000 and its deferred tax liability account increased by $120,000. Based solely on this information, which of the following statements is most likely to be true? A) Income tax expense equals income tax payable B) Income tax expense is greater than income tax payable C) Income tax payable is greater than income tax expense. D)Pretax financial statement income equals taxable income.
B! Short and sweet Income tax expenses= Income tax payables +variation in deferedd tax liability - variation in deferred tax assets
I think it’s B.
I may be mixing which one is fin statement and which is tax?
B is right and they used the formula to answer it. But I was thinking, if DTL increased then you payed more through payables(irs) if DTA decreased then you payed less through income statement? So I said C) Income tax payable is greater than income tax expense. Whats messed up with my statements above.
thanks strangedays for confusing me with your pre-edited answer 
Dreary Wrote: ------------------------------------------------------- > thanks strangedays for confusing me with your > pre-edited answer This is a good training… always follow your path! Random walk is sligthly more risky!
> But I was thinking, if DTL increased then you payed more through payables(irs) you paid less that’s why you have a liability.
SConnery Wrote: ------------------------------------------------------- > B is right and they used the formula to answer > it. > > But I was thinking, if DTL increased then you > payed more through payables(irs) > if DTA decreased > then you payed less through income statement? > > So I said C) Income tax payable is greater than > income tax expense. > > Whats messed up with my statements above. Usually, you report a DTA if a company reported a loss…so I think what you said is wrong
Yeah I had them mixed up… If taxable income on the tax return is LESS then the income statement then DTL is created. If taxable income on the tax return is MORE then the income statement then a DTA is created. So if tax payables > tax expense then DTA if tax payables < tax expense then DTL Does this sound right?
I think it works in this way! Any other suggestions?