Question

In: Accounting

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.

2015

2016

2017

Pretax financial income

$420,000

$455,000

$472,500

Excess depreciation expense on tax return

(15,000)

(20,000)

(5,000)

Excess warranty expense in financial income

10,000

5,000

4,000

Taxable income

$415,000

$440,000

$471,500

The income tax rate for all years is 40%.

Prepare the journal entry to record income tax expense, deferred income taxes, and income tax payable for 2015, 2016, and 2017.

Assuming there were no temporary differences prior to 2015, indicate how deferred taxes will be reported on the 2017 balance sheet. Sharp's product warranty is for 12 months.

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 2017, beginning with the line "Pretax financial income."

Where appropriate, show all calculations leading to the final solution.

Solutions

Expert Solution

ekkarill92 answered 1 year ago
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