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Gavin Toys, Inc. recorded book income of $275,000 in 2016. It does not have any permanent differences, and the only temporary difference relates to a
Gavin Toys, Inc. recorded book income of $275,000 in 2016. It does not have any permanent differences, and the only temporary difference relates to a $10,000 warranty expense that it recorded for book purposes. Gavin Toys anticipates fulfilling half of the warranties in the following year and then the rest equally over the next 2 years. The current enacted tax rate is 40%. The enacted tax rates for the following 3 years are 32%, 25%, and 25%, respectively. What deferred tax amount should Gavin Toys record for this temporary difference? than the tax basis of the liability. The tax rate Gavin Toys The book basis of the warranty liability is Inc. will use to calculate the deferred tax amount is Therefore, Gavin Shoes will record a deferred tax L in the amount of $
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