Solution 1:
Particulars | ($ in millions) | Tax Rate % | Tax $ | Recorded as: | ||
Pretax accounting income | $26.00 | $9.70 | Income tax expense | |||
Warranty costs reversing in: | ||||||
2019 | $2.00 | x | 30% | = | $0.60 | Deferred tax Assets |
2020 | $3.00 | x | 30% | = | $0.90 | Deferred tax Assets |
2021 | $3.00 | x | 30% | = | $0.90 | Deferred tax Assets |
2022 | $2.00 | x | 25% | = | $0.50 | Deferred tax Assets |
Total deferred tax amount | $2.90 | Deferred tax Assets | ||||
Income taxable in current year | $36.00 | x | 35% | = | $12.60 | Income tax Payable |
Journal Entries - Allmond Corporation (In millions) | |||
Date | Particulars | Debit | Credit |
31-Dec-18 | Income tax expense Dr | $9.70 | |
Deferred tax asset Dr | $2.90 | ||
To Income taxes payable | $12.60 | ||
(To record income tax expense for the year) |
Solution 2:
Net income = Pretax income - Income tax expense = $26 - $9.70 = $16.30 million
t Allmond Corporation, organized on January 3, 2018, had pretax accounting income of $26 million and...
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