Wilcox Company has prepared the following reconciliation of its pretax financial income with its taxable income for 2016:

Pretax financial income	$3,000
Add: Estimated expense on 1-year warranties recognized for financial reporting in excess of actual warranty costs deducted for income taxes	100
Less: MACRS depreciation deducted for income taxes in excess of depreciation recognized for financial reporting	(150)
Taxable income	$2,950

At the beginning of 2016, Wilcox had a deferred tax liability of $495. The current tax rate is 30%, and no change in the tax rate has been enacted for future years. At the end of 2016, Wilcox anticipates that actual warranty costs will exceed estimated warranty expense by $100 next year and that financial depreciation will exceed tax depreciation by $1,800 in future years. Wilcox has earned income in all past years and expects to earn income in the future.

Required:

1.	Prepare Wilcoxs income tax journal entry at the end of 2016.
2.	Prepare the lower portion of Wilcoxs 2016 income statement.
3.	Show how the income tax items are reported on Wilcoxs December 31, 2016, balance sheet.

CHART OF ACCOUNTS

Wilcox Company

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
160	Deferred Tax Asset
181	Equipment
198	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Revenue
260	Deferred Tax Liability
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
910	Income Tax Expense

Prepare Wilcoxs income tax journal entry on December 31, 2016.

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
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2
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4

Labels
Current Liabilities
Noncurrent Liabilities
Amount Descriptions
Net income
Net loss
Pretax income
Pretax loss

Prepare the lower portion of Wilcoxs 2016 income statement. Additional Instructions

Wilcox Company

Partial Income Statement

For the year ended December 31, 2016

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2
3

Show how the income tax items are reported on Wilcoxs December 31, 2016, balance sheet. Additional Instructions

Wilcox Company

Partial Balance Sheet

December 31, 2016

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2
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