Part 1: Temporary Differences Sharp Company has two temporary differences between its income tax expense and...
Part 1: Temporary Differences
Sharp Company has two temporary differences between its income tax expense and income taxes payable. The information is shown below.
|
2018 |
2019 |
2020 |
|
|
Pretax financial income |
$462,000 |
$500,500 |
$519,750 |
|
Excess depreciation expense on tax return |
(16,500) |
(22,000) |
(5,500) |
|
Excess warranty expense in financial income |
11,000 |
5,500 |
4,400 |
|
Taxable income |
$456,000 |
$484,000 |
$518,650 |
The income tax rate for all years is 40%.
- Explain your reasoning. Use the blank area in the template following the journal entries to make your notes.
- Prepare the income tax expense section of the income statement for 2018, beginning with the line "Pretax financial income."
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Part 1: Temporary Differences
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income computations have been prepared.
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2016
2017
2018
Excess of revenues over
expenses (excluding two temporary differences)
$154,000
$215,000
$93,500
Installment gross profit
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8,500
8,500
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warranties
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)
(5,500
)
(5,500
)
Taxable
income
$157,000
$218,000
$96,500
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2016
2017
2018
Excess of...
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Taxable income and pretax financial income would be identical
for Crane Co. except for its treatments of gross profit on
installment sales and estimated costs of warranties. The following
income computations have been prepared.
Taxable income
2016
2017
2018
Excess of revenues over
expenses (excluding two temporary differences)
$154,000
$215,000
$93,500
Installment gross profit
collected
8,500
8,500
8,500
Expenditures for
warranties
(5,500
)
(5,500
)
(5,500
)
Taxable
income
$157,000
$218,000
$96,500
Pretax financial income
2016
2017
2018
Excess of...
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Please check my answers.
1. Prepare Journal Entry to record income tax expense, deferred taxes, and income taxes payable for 2018 2. Draft the income tax expense section of the Income Statement, beginning with Income before income taxes". . Write an analysis directed toward the team at Good Company describing what the numbers mean and how they relate to the business. Information: Good Company began operations in 2018 and has provided the following information: 1. Pretax financial income for 2018...
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