Knowledge Check 01 Exeter Corp. reports warranty expense by estimating the amount that eventually will be...
Knowledge Check 01
Exeter Corp. reports warranty expense by estimating the amount that
eventually will be paid to satisfy warranties on its product sales.
For tax purposes, the expense is deducted when paid. During its
first year of operations, Exeter reports pretax accounting income
of $100,000. Its income statement includes a $50,000 warranty
expense that is deducted for tax purposes when paid in Year 2 in
the amount of $30,000 and Year 3 in the amount of $20,000. Exeter
is subject to a tax rate of 40%. Prepare the appropriate journal
entry to record the company’s income tax expense for Year 1.
(If no entry is required for a transaction/event, select
"No journal entry required" in the first account
field.)
Homework Answers
| Journal entries | ||
| General Journal | DEBIT ($) | CREDIT ($) |
| Income tax expense (100,000 x 40%) | 40,000.00 | |
| Deferred Tax asset | 20,000.00 | |
| Income tax payable | 60,000.00 | |
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Knowledge Check 01
Exeter Corp. reports warranty expense by estimating the amount that
eventually will be...
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