A company has a temporary difference due to depreciation. For fiscal year 2012, its Income Tax Expense is $15,000 and its Taxable Income is $10,000. The statutory tax rate is 35%
   Cr. Deferred Tax Liabilities       11,500
   Cr. Income Tax Payable          3,500
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   Cr. Income Tax Payable       15,000
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Dr. Deferred Tax Liabilities     85,000
   Cr. Income Tax Payable       100,000
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Dr. Deferred Tax Assets       85,000
   Cr. Income Tax Payable       100,000
   Cr. Deferred Tax Assets       11,500
   Cr. Income Tax Payable        3,500
First, note that depreciation leads to DTLs. The journal entry should Dr. Income Tax Expense 15,000; Cr. Deferred Tax Liability 11,500; and Cr. Income Tax Payable 3,500. Income Tax Payable = Taxable Income x Statutory Rate = $10,000 x .35 = $3,500. The DTL number is a plug to balance the entry.