Question
Exercise 19-18 Larkspur Inc., in its first year of operations, has the following differences between the book basis and tax basis of its assets and
Exercise 19-18 Larkspur 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 2016. Book Basis Tax Basis Equipment (net) $367,000 $306,000 Estimated warranty liability $191,000 $ 0 It is estimated that the warranty liability will be settled in 2017. The difference in equipment (net) will result in taxable amounts of $18,700 in 2017, $31,500 in 2018, and $10,800 in 2019. The company has taxable income of $497,000 in 2016. As of the beginning of 2016, the enacted tax rate is 34% for 20162018, and 30% for 2019. Larkspur expects to report taxable income through 2019. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2016. (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.) Account Titles and Explanation Debit Credit Income Tax Expense Deferred Tax Asset Income Tax Payable 168980 Deferred Tax Liability SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Indicate how deferred income taxes will be reported on the balance sheet at the end of 2016. Larkspur Inc. Balance Sheet Deferred Tax Asset $
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