Flynn Inc. has two temporary differences at the end of 2015. The first difference stems from installment

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Flynn Inc. has two temporary differences at the end of 2015. The first difference stems from installment sales, and the second one results from the accrual of a loss contingency. Flynn’s accounting department has developed a schedule of future taxable and deductible amounts related to these temporary differences as follows.

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As of the beginning of 2015, the enacted tax rate is 34% for 2015 and 2016, and 38% for 2017–2020. At the beginning of 2015, the company had no deferred income taxes on its statement of financial position. Taxable income for 2015 is $400,000. Taxable income is expected in all future years.
Instructions

(a) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2015.

(b) Indicate how deferred income taxes would be classified on the statement of financial position at the end of 2015.

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Intermediate Accounting IFRS Edition

ISBN: 9781118443965

2nd Edition

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield

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