Question
Carla Inc., in its first year of operations, has the following differences between the book basis and tax basis of its assets and liabilities at
Carla 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 2019.
Book Basis | Tax Basis | |||
Equipment (net) | $431,000 | $367,200 | ||
Estimated warranty liability | $212,000 | $-0- |
It is estimated that the warranty liability will be settled in 2020. The difference in equipment (net) will result in taxable amounts of $20,300 in 2020, $32,900 in 2021, and $10,600 in 2022. The company has taxable income of $504,000 in 2019. As of the beginning of 2019, the enacted tax rate is 34% for 20192021, and 30% for 2022. Carla expects to report taxable income through 2022.
a)Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2019. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Debit Credit Income Tax expense $
Deferred tax asset $
Income Tax payable $
Deferred tax liability $
b)Indicate how deferred income taxes will be reported on the balance sheet at the end of 2019.
Carla Inc. Balance Sheet December 31, 2019
| ||||||
$ ______ |
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