Example 3-Deferred Tax Asset from Warranties RDP Networking reported pretax accounting income in 2016, 2017, and 2018 of $70 million, $100 million, and $100 million, respectively. The 2016 income statement includes a $30 million warranty expense that is deducted for tax purposes when paid in 2017 ($15 million) and 2018 ($15 million). The income tax rate is 40% each year. Step 1: Find Taxable Income and cash tax owed each year affected by the warranty 2016 2017 2018 Total Step 2: Look at the net temporary differences in each year senerated from the 2016 event. We need to book the deferred tax asset based on the future taxes owed. Step 3: Now we can make the journal entry recording book tax expense for all three years