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
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
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.
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
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
Definition Definition Method of recording financial transactions in the book of original entry by debiting and crediting the accounts affected by a transaction using the golden rules of accrual accounting.
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