Question

The information that follows pertains to Esther Food Products:

1. At December 31, 2018, temporary differences were associated with the following future taxable (deductible) amounts:

Depreciation	$	46,000
Prepaid expenses		19,000
Warranty expenses		(16,000	)

2. No temporary differences existed at the beginning of 2018.
3. Pretax accounting income was $65,000 and taxable income was $16,000 for the year ended December 31, 2018.
4. The tax rate is 40%.
   Homework -- Chapter 16.2 More Deferred Taxes an... O Saved Help Save & Exit Submit Check my work Calculation General Journal 8.33 points Complete the following table given below to record income taxes for 2018. (Negative amounts should be entered with a minus sign.) X Tax Rate = Tax $ Recorded as: eBook $ 65,000 Hint Pretax accounting income Permanent differences No permanent differences Income subject to taxation Temporary Differences Ask 65,000 65 x 6 01 Print References Income taxable in current year $ 65,000 x
   

Answer 1

Table is prepared as follows:-

X Tax Rate = Tax $ Recorded as: $ 65,000.00 $ 65,000.00 X 40% = $ 26,000.00 Income tax expense Pretax accounting income Permanent Difference No permanent difference Income subject to taxation Temporary Differences Depreciation Prepaid Expenses Warranty Expenses Income taxable in current year $ $ $ $ (46,000.00) X (19,000.00) 16,000.00 16,000.00 x 40% 40% 40% 40% = $ 18,400.00 Deferred tax liability = $ 7,600.00 Deferred tax liability $ 6,400.00 Deferred tax asset = $ 6,400.00 Income tax payable

Journal entry is as follows:-

Credit Account Titles Income tax expense Deferred tax asset Income tax payable Deferred tax liability Debit 26,000.00 6,400.00 $ $ $ 6,400.00 26,000.00