Taxable income and pretax financial income would be identical for Jiang Group except for its treatments of gross profit on installment sales and estimated costs of warranties. The following income computations have been prepared

(amounts in thousands).

The tax rates in effect are 2014, 45%; 2015 and 2016, 40%. All tax rates were enacted into law on January 1, 2014. No deferred income taxes existed at the beginning of 2014. Taxable income is expected in all future years.
Instructions Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2014, 2015, and 2016.

Transcribed Image Text:

Taxable income 2014 2015 2016 Excess of revenues over expenses (excluding two temporary differences) 160,000 210,000 90,000 Installment income collected 8,000 8,000 8,000 Expenditures for warranties (5,000) (5,000) (5,000) Taxable income 163,000 213,000 93,000 2014 2015 2016 Pretax financial income Excess of revenues over expenses (excluding two temporary differences) 160,000 210,000 90,000 Installment gross profit earned 24,000 -0- -0- Estimated cost of warranties (15,000) -0- -0- Income before taxes 169,000 210,000 90,000