Lance Lawn Services reports warranty expense by estimating the amount that eventually will be paid tosatisfy warranties on its product sales. For tax purposes, the expense is deducted when the warranty workis completed. At December 31, 2021, Lance has a warranty liability of $2 million and taxable income of $75million. At December 31, 2020, Lance reported a deferred tax asset of $471,000 related to this difference inreporting warranties, its only temporary difference. The enacted tax rate is 25% each year.Required:Prepare the appropriate journal entry to record Lance's income tax provision for 2021. (If no entry isrequired for a transaction/event, select "No journal entry required" in the first account field. Enter youranswers in whole dollars.)View transaction listJournal entry worksheet>Record 2021 income taxes.Note: Enter debits before credits.TransactionGeneral JournalDebitCredit1Record entryClear entryView general journal

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms.…

Answered: Prepare the appropriate journal entry…

Business

Accounting

Prepare the appropriate journal entry to record Lance's income tax provision for 2021.

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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Concept explainers

Fringe Benefit Tax

Fringe benefits are in addition to the compensation that companies give to their employees. It is an additional benefit above the stated salary. It helps to keep the employees of the firm motivated as sometimes the only salary is not enough to retain the quality employees of the firm. There are different types of fringe benefits. Fringe benefits are given in both private as well as public enterprises.

Question

Lance Lawn Services reports warranty expense by estimating the amount that eventually will be paid to
satisfy warranties on its product sales. For tax purposes, the expense is deducted when the warranty work
is completed. At December 31, 2021, Lance has a warranty liability of $2 million and taxable income of $75
million. At December 31, 2020, Lance reported a deferred tax asset of $471,000 related to this difference in
reporting warranties, its only temporary difference. The enacted tax rate is 25% each year.
Required:
Prepare the appropriate journal entry to record Lance's income tax provision for 2021. (If no entry is
required for a transaction/event, select "No journal entry required" in the first account field. Enter your
answers in whole dollars.)
View transaction list
Journal entry worksheet
>
Record 2021 income taxes.
Note: Enter debits before credits.
Transaction
General Journal
Debit
Credit
1
Record entry
Clear entry
View general journal

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