Intermediate Accounting

Sunny Inc. must update their financial statements to reflect the tax impact of the following two events, both which result in GAAPITax temporary differences. Note: We are assuring that Sunny Inc has correctly recorded income tax expense for all transactions other than the two listed below. Trarsaction #1 On December 31, Year 2, Surny Inc purchased a new golf cart (we will just classify this as "equipment"). The golf cart has a 3-year useful life, was purchased for $60,000 cash, and has an expected value of $0 after its 3-year useful life. Sunuy Inc calculates GAAP depreciation using the straight-line method. However, tax depreciation is accelerated (i.e., depreciated more in early years and less in later years). The tax depreciation is $50,000 for Year 3,$10,000 for Year 4, and $0 for Year 5 . Transaction 42 previously, Sunny Inc recorded waranty expense of $22,500 for Year 2, but orly paid $5,750 in warranty costs in Year 2. The remaining $16,750 of warranty costs are expected to be paid in Year 3. This represents a temporary difference because GAAP warranty expense was recorded at the time of the sale, but warranty expenses are deductible for tax purposes when they are paid. Pre-tax accounting income related to this transaction is $352,500 ( $750,000 in revenue minus $375,000 COGS minus $22,500 warranty expense). Task 1) Fill out the table below to calculate the tax effects of these transactions. Task 2) Record the joumal entries to record the purchase of the golf cart and the income tax effects of these two transaction in Year 2. Task 3) Input operating financing and investing cash flows into the provided table