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Company A reports pretax financial income of $100,000 for 2019. The following items caused taxable income to be different than pretax financial income. $5,000 of

Company A reports pretax financial income of $100,000 for 2019. The following items caused taxable income to be different than pretax financial income.

  1. $5,000 of life insurance carried by the company on key officers.
  2. Estimated warranty liability is $20,000 for accounting purposes and $0 for tax purposes.
  3. Depreciation for tax purposes exceeds depreciation for accounting purposes by $25,000.

Company A's tax rate is 25% for all years, and the company expects to report taxable income in all future years. There are no deferred taxes at the beginning of 2019.

Instructions:

  1. Compute taxable income and income taxes payable for 2019.

  1. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2019.

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