Macinski Inc., in its first year of operations, has the following differences between the book basis and

Question:

Macinski Inc., in its first year of operations, has the following differences between the book basis and tax basis of its assets and liabilities at the end of 2015.

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It is estimated that the warranty liability will be settled in 2016. The difference in equipment (net) will result in taxable amounts of \($20\),000 in 2016, \($30\),000 in 2017, and \($10\),000 in 2018. The company has taxable income of \($550\),000 in 2015. As of the beginning of 2015, the enacted tax rate is 34% for 2015–2017, and 30%
for 2018. Macinski expects to report taxable income through 2018.
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 will be reported 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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