now we can wrap things up by doing the journal entries that need to be done for 2016 and

taking a look at what the income statement would look like. The 2016 journal entries

for taxes are made up from the rough work we did in the current and the deferred and

the step one and the step two calculations. From the step one calculation, we're going

to record the current tax expense, which is a debit to an account. Current income tax

expense, $14,000 is what we calculated, and a credit to income tax payable, $14,600. That

would be to record current tax expense for the year. From the step two calculation, the

deferred tax calculation, we had a deferred tax expense that had to be recorded of $975.

The other side of that entry, we're going to get rid of the deferred tax asset that

we had of $600 and set up the deferred tax liability that we need of $375 on the balance

sheet.

What have we got? In the income statement, we're going to have these two values. They're

going to go onto the income statement, and we're going to show what the statement of

earnings or income statement is going to look like for 2016. For the balance sheet, we've

got this value that's gone into the current liabilities, and we've got this value sitting

in the long-term liabilities. This value has been made to go to zero, because it was an

asset of $600, and we've gotten rid of it. We've got a long-term liability of $375 and

we've got a current liability of $14,600 on our balance sheet. On our income statement,

you're got just your normal income statement, sales less expenses and so on.

We'll come down to to this: net income before tax is $80,000. The tax entries is going to

be made up of two items. You've got the current tax from this journal entry of $14,600 and

we've got the deferred tax of $975 expense, so the total tax expense is $15,575. Net income before taxes less the

total tax expense, which is made up of both pieces, the current and the deferred, $15,575,

will give you a net income of $64,425 after taxes. That is the completion of the tax accounting

for 2016 for this company.

Thanks for watching this video series on income tax accounting. I hope it was of some value

to you. Stay tuned for another video series on loss carry-backs and loss carry-forwards

if you're interested. Thanks for your attention and see you soon.