Jenny Corporation recorded warranty accruals as at December 31, 2011, in the amount of $150,000. This reversing difference will cause deductible amounts of $50,000 in 2012, $35,000 in 2013, and $65,000 in 2014. Jenny’s accounting income for 2011 is $135,000 and the tax rate is 25% for all years. There are no future tax accounts at the beginning of 2011.
Instructions
(a) Calculate the future income tax balance at December 31, 2011.
(b) Calculate taxable income and current income taxes payable for 2011.
(c) Prepare the journal entries to record income taxes for 2011.
(d) Prepare the income tax expense section of the income statement for 2011, beginning with the line “Income before income taxes.”