Ajax Products, Inc., reported an excess of warranty expense over warranty deductions of $72,000 for the...

Ajax Products, Inc., reported an excess of warranty expense over warranty deductions of $72,000 for the year ended December 31, 2020. This temporary difference will reverse in equal amounts of $24,000 in years 2021, 2022, and 2023. The enacted tax rates are as follows: 2020: 40%; 2021: 25%; 2022: 21%; 2023: 20%. The reporting for this temporary difference at December 31, 2020, would be a

Question 4 options:

	deferred tax liability of $15,840.
	deferred tax liability of $28,800.
	deferred tax asset of $28,800.
	deferred tax asset of $15,840.

Expert Solution

Year	Reversal amount	Tax rate	Deferred Tax assets $
2021	24,000	25%	6,000
2022	24,000	21%	5,040
2023	24,000	20%	4,800
Total	72,000		15,840

Correct answer is option 4.

ekkarill92 answered 6 months ago

1) Carpenter Inc. estimates warranty expense at 4% of sales. Sales during the year were $8...

1) Carpenter Inc. estimates warranty expense at 4% of sales. Sales during the year were $8 million and warranty expenditures were $47,000. What was the balance in the Warranty Liability account at the end of the year? 2)On November 1, Vacation Destinations borrows $1.58 million and issues a six-month, 8% note payable. Interest is payable at maturity. Record the issuance of the note and the appropriate adjusting entry for interest expense at December 31, the end of the reporting period....

Metlock, Inc. sells products that carry a two year warranty. Any defective product is replaced with...

Metlock, Inc. sells products that carry a two year warranty. Any defective product is replaced with a new item taken from inventory. Management believes that this is the most cost effective way to deal with any defects or customer complaints. Estimates of claims are expected to be 2 out of every 100 units sold. The units sell for $32 and cost $22. All sales are on account, and the 13% HST is not included in the selling price. Also, in...

QUESTION 56 In performing analytical procedure over debt interest, the auditor finds company reported interest expense...

QUESTION 56 In performing analytical procedure over debt interest, the auditor finds company reported interest expense is materially higher than the auditor’s expectations. The most likely conclusion for the auditor would be that the company has not a. recorded interest bearing debt in its records. b. recorded paid or accrued all interest expense. c. properly accounted for the discount of bonds payable account. d. properly recorded interest income. 2 points QUESTION 57 Which of the following balance-related audit objectives...

Bob's, Inc. reported net income of $658,000 and depreciation expense of $57,500 in 20X2. Bob's also...

Bob's, Inc. reported net income of $658,000 and depreciation expense of $57,500 in 20X2. Bob's also reported income of $625,000 and depreciation expense of $67,500 in 20X1. The current portion of the balance sheets are reproduced below: 20X2 20X1 20X2 20X1 Current Assets Current Liabilities Cash and marketable securities 1,000 900 Line of credit 0 1,000 Accounts Receivable 1,500 1,600 Accounts Payable 2,200 2,350 Inventory 4,552 4,337 Accrued expenses 1,505 1,605 Prepaid expenses 110 115 Calculate the 20X2...

Becker Inc. reported net income of $560,000 on its income statement for 2020. Depreciation expense for...

Becker Inc. reported net income of $560,000 on its income statement for 2020. Depreciation expense for the year was $63,000. Over the course of the year, Becker also experienced the following changes in account balances: Accounts payable: $12,000 increase Inventory: $18,000 increase Accounts receivable: $9,000 decrease Accrued liabilities: $19,000 decrease Prepaid insurance: $7,000 decrease Determine net cash provided by operating activities for 2020.

Landcaster Inc. sells its products with a 2-year service-type warranty. On January 1, Year 1, Landcaster...

Landcaster Inc. sells its products with a 2-year service-type warranty. On January 1, Year 1, Landcaster sells 60 machines for $2,500 each, on account. Landcaster determines that the machines normally sell for $2,275 each and the service-type warranty could be purchased for $225 per machine. In Year 1, Landcaster pays $5,000 for warranty costs. Required: Landcaster Inc. sells its products with a 2-year service-type warranty. On January 1, Year 1, Landcaster sells 60 machines for $2,500 each, on account. Landcaster...

Kennedy, Inc. reported the following data: Net income $179,562 Depreciation expense 15,511 Loss on disposal of...

Kennedy, Inc. reported the following data: Net income $179,562 Depreciation expense 15,511 Loss on disposal of equipment 11,046 Gain on sale of building 21,801 Increase in accounts receivable 8,734 Decrease in accounts payable 3,109 Required: Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method. Refer to the list of Amount Descriptions for the exact wording of the answer choices for text entries. Use the minus sign to indicate cash outflows, cash...

The reported net incomes for the first 2 years of Splish Products, Inc., were as follows:...

The reported net incomes for the first 2 years of Splish Products, Inc., were as follows: 2020, $147,800; 2021, $202,000. Early in 2022, the following errors were discovered. 1. Depreciation of equipment for 2020 was overstated $15,900. 2. Depreciation of equipment for 2021 was understated $38,300. 3. December 31, 2020, inventory was understated $49,500. 4. December 31, 2021, inventory was overstated $14,900. Prepare the correcting entry necessary when these errors are discovered. Assume that the books are closed. (Ignore income...

Question #3: H&M, Inc. reported the following data: Net income $200,000 Depreciation expense 25,000 Loss on...

Question #3: H&M, Inc. reported the following data: Net income $200,000 Depreciation expense 25,000 Loss on disposal of equipment 30,000 Increase in accounts receivable 20,000 Decrease in accounts payable (8,000) Requirement: Prepare the cash flows for operating activities under the indirect method as it would appear on the statement of cash flows. Question #4: Explain the difference between static and flexible budgets. Provide a detailed example of how companies can use flexible budgets for decision making.

Orange Inc. manufactures two products called Unit 1 and Unit 2. Revenue and expense amounts per...

Orange Inc. manufactures two products called Unit 1 and Unit 2. Revenue and expense amounts per unit are as follows: Description All amounts are Per Unit Unit 1 Unit 2 Sales price $39.00 $93.00 Costs: Direct material 21.00 15.00 Direct manufacturing labor 3.00 18.00 Overhead - variable 3.75 22.50 Overhead - fixed 2.00 12.00 Selling and administrative costs - Variable 2.25 1.50 Total expense 32.00 69.00 Operating income...

Question