Normal No Spacing 812 9 10:12 13 14 15 16:15 1. The following represents information about the first several years of operations . . . Year 2, financial income before tax: $100,000 Warranty Year on the company recorded warranty expense of $10,000. It will be paid in years two and three. Year two warranty expense was S8,000 to be paid in years three and four In year two, the company accrued S15,000 for fines for an environmental spill which will be paid in year three In year two, the company recognized $6,000 of municipal interest income. Deferred revenue in year one was $30,000 to be recognized in year two for book purposes . Company purchased a truck in year one for $31.000. It is depreciated over three years, 0 residual value, straight line for book purposes. Por tax purposes the company is allowed to expense the entire amount in the first year DTA at the beginning of year two is $12,000. . DTL at the beginning of year two is 56,600 The tax rate in years one and two was 30%. At the end of year two, Congress approved tax rate increase to 40% for future years. You were hired at the beginning of YEAR TWO. The person who did the work for year one, a former UP grad, was promoted. You are confident it was done correctly in the prior year. . . . Prepare the journal entry that the company will make for year two. (6 points) 1 b. Prepare an income statement starting at Income before tax points) Normal No Spacing 812 9 10:12 13 14 15 16:15 1. The following represents information about the first several years of operations . . . Year 2, financial income before tax: $100,000 Warranty Year on the company recorded warranty expense of $10,000. It will be paid in years two and three. Year two warranty expense was S8,000 to be paid in years three and four In year two, the company accrued S15,000 for fines for an environmental spill which will be paid in year three In year two, the company recognized $6,000 of municipal interest income. Deferred revenue in year one was $30,000 to be recognized in year two for book purposes . Company purchased a truck in year one for $31.000. It is depreciated over three years, 0 residual value, straight line for book purposes. Por tax purposes the company is allowed to expense the entire amount in the first year DTA at the beginning of year two is $12,000. . DTL at the beginning of year two is 56,600 The tax rate in years one and two was 30%. At the end of year two, Congress approved tax rate increase to 40% for future years. You were hired at the beginning of YEAR TWO. The person who did the work for year one, a former UP grad, was promoted. You are confident it was done correctly in the prior year. . . . Prepare the journal entry that the company will make for year two. (6 points) 1 b. Prepare an income statement starting at Income before tax points)
