1. Please explain where the Income Before Warranty Costs of $270,000 comes from?

2. Why is the $80,000 of warranty repairs subtracted when computing Income Tax Payable and not when computing Income Tax Expense?

Portrait Mirrors, Ltd. offers a 3-year warranty on all its products. In Year 1, the company reported income before warranty expense of $590,000 and estimated that warranty repairs would cost the company $120,000 over the 3-year period. Actual repairs for the year amounted to $70,000. (Click the icon to view the journal entry for Year 1.) In Year 2, assume that Portrait reported income before warranty costs and taxes of $100,000 and incurred actual repair costs of $80,000. Assume that the firm did not accrue additional warranty costs in Year 2. Portrait Mirrors' tax rate is 40%. Prepare the journal entries required to record the tax provision for Year 2. (Record debits first, then credits. Exclude explanations from any journal entries.) Account Year 1 Income Tax Expense 188,000 Deferred Tax Asset 20,000 Income Taxes Payable 208,000 Computation of Income Tax Payable Income before warranty costs $ 270,000 (80,000) Actual warranty repairs Taxable income $ 190,000 Tax rate 40 % Income tax payable $ 76,000