XYZ Co. at the end of 2018, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income 750,000 Estimated expenses deductible for taxes when paid 1,200,000 Extra depreciation (1,350,000) Taxable income 600,000 Estimated warranty expense of 800,000 will be deductible in 2019, 300,000 in 2020, and 100,000 in 2021. The use of the depreciable assets will result in taxable amounts of 450,000 in each of the next three years.

Instructions

(a) Prepare a table of future taxable and deductible amounts.

(b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2018, assuming an income tax rate of 40% for all years.