A firm has revenues of $20,000 for each of three years. The firm estimates the warranty expense to be 8.0% of revenues each year. The actual expenditure of $4,800 to meet warranty claims was not made until the third year. According to tax rules, such expenses cannot be recognized until actually paid. The current tax rate is 35% 2. IRS Revenue Warranty Expense EOY1 EOY2 EOY3 20,000 20,000 20,000 Financial Reporting (GAAP) Revenue Warranty Expense EOY1 EOY2 EOY3 20,000 20,000 20,000 Carrying amount Tax base Taxes Payable Tax Expense DTA DTL