At the end of its first year of operations, Margaret's Manufacturing had earnings of $180,000, before income

Question:

At the end of its first year of operations, Margaret's Manufacturing had earnings of $180,000, before income taxes. One of the expenses that was deducted in determining this amount was product warranty expense of $50,000. However, the amount that was spent to settle product warranty claims during the year (the amount that is deductible for income tax purposes) was only $30,000. The income tax rate was 35%.
Required:
a. What amount of product warranty obligation will be reported as a liability on the company's at the end of the year?
b. Calculate the company's taxable income for the year and the amount of tax that is currently payable.
c. Calculate the amount of deferred income tax related to the product warranty. State whether it is a deferred tax asset or a deferred tax liability, and explain your reasoning.
d. What amount of income tax expense will be reported on the company's statement of earnings for the year? Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...