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How can deferred asset even equal $3,000 if it isn't taken out until 209. They are asking for 2018, and it goes $3,000 in each
How can deferred asset even equal $3,000 if it isn't taken out until 209. They are asking for 2018, and it goes $3,000 in each year starting from 2019 to 2021. I use the intermediate accounting 2 book by Spiceland, 9th edition. This is problem Ch.16-10-BE.
Chapter 16, Problem 10BE 6 Bookmarks Show all steps: O ON Problem J-Matt, Inc., had pretax accounting income of $291,000 and taxable income of $300,000 in 2018. The only difference between accounting and taxable income is estimated product warranty costs for sales this year. Warranty payments are expected to be in equal amounts over the next three years. Recent tax legislation will change the tax rate from the current 40% to 30% in 2020. Determine the amounts necessary to record J-Matt's income taxes for 2018 and prepare the appropriate journal entry. Determine the amount necessary to record Incorporation J's income taxes for 2018. year Future deductible amount | Total 2019 2020 2021 Current Particulars 2018 Pre-tax accounting income $291,000 Temporary difference: Warranty expense $9,000 Taxable income tax return) $300,000 Enacted tax rate Income Tax Payable $120,000 Deferred tax asset $(3,000) $(3,000) $(3,000) 40% 40% 40% 30% 30% 30% S(1,200) S(900) S(900) S(3,000) Prepare journal entry at the end of 2018: Journal Entry: Date Account Title and Explanation Post Ref. Credit (S) Debit (S) 117,000 3,000 2018 Income Tax Expense Deferred Tax Asset Income Tax Payable [To record the income tax provision for 2016.] 120,000 Explanation: Income tax expense reduces the stockholders' equity. Hence, debit income tax expense with $117,000 Deferred tax asset is an asset and is increased by $3,000. Therefore, debit deferred tax asset account with $3,000. Income tax payable increases the liability by $120,000. Therefore, credit Income tax payable account with $120,000Step by Step Solution
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