REQUIREMENTS

1) Compute taxable income (loss) for 2017 and 2018. ( 6 points)

2) Prepare journal entries to record 2017 and 2018 tax expense (benefit).

REQUIRED Jones Co. began operations on January 1, 2017. The only items for which Jones reports differently for financial and tax purposes are i sales and accrues warranties in the year of the sale giving rise to the amounts for financial purposes and for tax received or paid. The recognized sales and accrued warranties (in bold) for financial purposes and the cash flows for tax purposes are provided in t nstallment sales and warranties. Jones recognizes purposes recognizes the taxable and deductible amounts when cash is the tables below 2017 $565,000 2019 2020 Installment Sales 2017 Cash Collected on 2017 Installment Sales $200,000 $215,000 $150,000 Installment Sales 2018 Cash Collected on 2018 Installment Sales Warranties 785,000 $250,000 $400,000 S135,000 2017 $215,000 2018 2019 Estimated Warranties from 2017 Sales Cash Paid for Warranty work related to 2017 Sales 75,000 $140,000 Estimated Warranties from 2018 Sales 2018 Cash Paid for Warranty work related to 2018 Sales $295,000 S130,000 $165,000 . Enacted tax rates as of 2017 are: o 2017 o 2018 o 2019 and later 3096 35% 35% .Assume estimated cash collections from installment sales and cash paid for warranty work occur as expected (as indicated in the tables). Whenever possible, Jones carries taxable net operating losses back for a refund of prior year's taxes. Losses unable to be carried back are carried forward. Financial income in 2017 is $300,000 and financial income in 2018 is $275,000 REQUIREMENTS 1) Compute taxable income (loss) for 2017 and 2018. 2 Prepare journal entries to record 2017 and 2018 tax expense (benefit). (Hint: Appendix 6 points) 19A presents a comprehensive deferred tax example that may be helpful in completing this problem. (14 points) 2018 Taxable loss 2018 Income tax expense ($20,000) $84,750 2