6 Lance Lawn Services reports warranty expense by estimating the amount that eventually will be paid to satisfy warranties on its product sales. For tax purposes, the expense is deducted when the cost is incurred. At December 31, 2018, Lance has a warranty liability of $1 million and taxable income of $90 million. At December 31, 2017, Lance reported a deferred tax asset of $442,000 related to this difference in reporting warranties, its only temporary difference. The enacted tax rate is 40% each year. Required: Prepare the appropriate journal entry to record Lances income tax provision for 2018.

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8 At the end of 2017, Payne Industries had a deferred tax asset account with a balance of $32 million attributable to a temporary book-tax difference of $80 million in a liability for estimated expenses. At the end of 2018, the temporary difference is $70 million. Payne has no other temporary differences. Taxable income for 2018 is $210 million and the tax rate is 40%. Payne has a valuation allowance of $8 million for the deferred tax asset at the beginning of 2018. Required: 1. Prepare the journal entry(s) to record Paynes income taxes for 2018, assuming it is more likely than not that the deferred tax asset will be realized.

Ayres Services acquired an asset for $94 million in 2018. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 40 % Amounts for pretax accounting income, depreciation, and taxable income in 2018, 2019, 2020, and 2021 are as follows: ($ in millions 2018 2019 2020 2021 Pretax accounting income Depreciation on the income statement S 365 385 400 435 23.5 23.5 23.5 23.5 (28.5) (36.5) (18.5) (10.5) Depreciation on the tax return 360 372 405 448 Taxable income Required: Determine (a) the temporary book-tax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account. (Leave no cell blank, enter "O" wherever applicable. Show all amounts as positive amounts. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).) Answer is complete but not entirely correct. Beginning of 2018 End of End of 2018 End of End of 2019 2020 2021 Temporary Difference 0.0xS $ 0.0XS 0.0 5.0 0.0 Deferred Tax Liability $ 5.2 S $ 0.0 2,0 S 7,2 0.0 Prepare the journal entry(s) to record Payne's income taxes for 2018, assuming it is more likely than not that one-fourth of the deferred tax asset will ultimately be realized. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).) Show less A General Journal No Event Debit Credit Income tax expense 88.0 Deferred tax asset 4.0 Income tax payable 84.0 2 2 Income tax expense -5.2 -5.2 x Valuation allowance-Deferred tax asset