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Ashford Starshine Group provided the following income information from its first 3 years of operation. (Click the icon to view the income information for the first 3 years of operation.) Ashford offers a 1-year warranty on its commercial floor polishing system. The company estimates its warranty cost at 10% of sales. Read the requirements. Requirement a. Compute the deferred tax expense and the balance of the deferred tax account for each year. (Enter a "0" for any zero balances. Use a minus sign or parentheses for amounts that represent a future taxable amount, a deferred tax liability, and a decrease in deferred tax asset.) Year 1 Year 2 Year 3 Book Basis Tax Basis Future Deductible (Taxable) Amount Tax Rate % % % Deferred Tax Asset (Liability) Increase (Decrease) in Deferred Tax Asset

Ashford Starshine Group provided the following income information from its first 3 years of operation. (Click the icon to view the income information for the first 3 years of operation.) Ashford offers a 1-year warranty on its commercial floor polishing system. The company estimates its warranty cost at 10% of sales. Read the requirements. Requirement a. Compute the deferred tax expense and the balance of the deferred tax account for each year. (Enter a "0" for any zero balances. Use a minus sign or parentheses for amounts that represent a future taxable amount, a deferred tax liability, and a decrease in deferred tax asset.) Year 1 Year 2 Year 3 Book Basis Tax Basis Future Deductible (Taxable) Amount Tax Rate % % % Deferred Tax Asset (Liability) Increase (Decrease) in Deferred Tax Asset

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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a.
Compute the deferred tax expense and the balance of the deferred tax account for each year.
b.
 Prepare all journal entries required to record Ashford​'s income tax provision for all 3 years.
Ashford Starshine Group provided the following income information from its first 3 years of operation. (Click the icon to view the income information for the first 3 years of operation.) Ashford offers a 1-year warranty on its commercial floor polishing system. The company estimates its warranty cost at 10% of sales. Read the requirements. Requirement a. Compute the deferred tax expense and the balance of the deferred tax account for each year. (Enter a "0" for any zero balances. Use a minus sign or parentheses for amounts that represent a future taxable amount, a deferred tax liability, and a decrease in deferred tax asset.) Year 1 Year 2 Year 3 Book Basis Tax Basis Future Deductible (Taxable) Amount Tax Rate % % % Deferred Tax Asset (Liability) Increase (Decrease) in Deferred Tax Asset
Transcribed Image Text:Ashford Starshine Group provided the following income information from its first 3 years of operation. (Click the icon to view the income information for the first 3 years of operation.) Ashford offers a 1-year warranty on its commercial floor polishing system. The company estimates its warranty cost at 10% of sales. Read the requirements. Requirement a. Compute the deferred tax expense and the balance of the deferred tax account for each year. (Enter a "0" for any zero balances. Use a minus sign or parentheses for amounts that represent a future taxable amount, a deferred tax liability, and a decrease in deferred tax asset.) Year 1 Year 2 Year 3 Book Basis Tax Basis Future Deductible (Taxable) Amount Tax Rate % % % Deferred Tax Asset (Liability) Increase (Decrease) in Deferred Tax Asset
Account Sales Operating expenses Estimated warranty cost Actual warranty repairs Income before tax Taxable income Tax rate Tax payable Year 1 GAAP $ 1,450 $ (540) (145) 0 $ 765 $ Tax 0 0 1,450 $ 1,350 $ (540) (870) (135) 0 910 x 40% 364 Year 2 $ GAAP 345 $ $ Tax 1,350 $ (870) 0 (220) 260 x 40% 104 $ Year 3 GAAP 1,300 $ (780) (130) 0 390 $ $ Tax 1,300 (780) 0 (190) 330 x 40% 132
Transcribed Image Text:Account Sales Operating expenses Estimated warranty cost Actual warranty repairs Income before tax Taxable income Tax rate Tax payable Year 1 GAAP $ 1,450 $ (540) (145) 0 $ 765 $ Tax 0 0 1,450 $ 1,350 $ (540) (870) (135) 0 910 x 40% 364 Year 2 $ GAAP 345 $ $ Tax 1,350 $ (870) 0 (220) 260 x 40% 104 $ Year 3 GAAP 1,300 $ (780) (130) 0 390 $ $ Tax 1,300 (780) 0 (190) 330 x 40% 132
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