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Tax-2 Problem Gordon Company was started on January 1, 2010 and has two temporary differences between its income tax expense and income taxes payable. The
Tax-2 Problem Gordon Company was started on January 1, 2010 and has two temporary differences between its income tax expense and income taxes payable. The information is shown below: Pre-tax financial income Excess of depreciation expense on tax return Excess of warranty expense in financial income Taxable income 2010 840,000 (30,000) 20,000 830,000 2011 910,000 (40,000) 10,000 880,000 2012 945,000 (20,000) 8,000 933,000 The income tax rate is 40% for all years. Instructions: a. Prepare the journal entry to record income tax expense, deferred taxes and income tax payable for 2010, 2011, and 2012. b. Indicate how deferred taxes will be reported on the 2012 balance sheet. Gordon's product warranty is for 12 months. c. Prepare the income tax expense section of the income statement for 2012, beginning with the line, "Pretax financial income
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