Taxable income and pretax financial income would be identical for Marin Co. except for its treatments of gross profit on installment sales and estimated costs of warranties. The following income computations have been prepared. Taxable income 2016 2017 2018 Excess of revenues over expenses (excluding two temporary differences) $154,000 $215,000 $93,500 Installment gross profit collected 8,500 8,500 8,500 Expenditures for warranties (5,500 ) (5,500 ) (5,500 ) Taxable income $157,000 $218,000 $96,500 Pretax financial income 2016 2017 2018 Excess of revenues over expenses (excluding two temporary differences) $154,000 $215,000 $93,500 Installment gross profit recognized 25,500 0 0 Estimated cost of warranties (16,500 ) 0 0 Income before taxes $163,000 $215,000 $93,500 The tax rates in effect are 2016, 40%; 2017 and 2018, 45%. All tax rates were enacted into law on January 1, 2016. No deferred income taxes existed at the beginning of 2016. Taxable income is expected in all future years.Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2016, 2017, and 2018.

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Taxable income and pretax financial income would be identical for Marin Co. except for its treatments of gross profit on installment sales and estimated costs of warranties. The following income computations have been prepared.

Taxable income	2016		2017		2018
Excess of revenues over expenses (excluding two temporary differences)	$154,000		$215,000		$93,500
Installment gross profit collected	8,500		8,500		8,500
Expenditures for warranties	(5,500	)	(5,500	)	(5,500	)
Taxable income	$157,000		$218,000		$96,500

Pretax financial income	2016		2017		2018
Excess of revenues over expenses (excluding two temporary differences)	$154,000		$215,000		$93,500
Installment gross profit recognized	25,500		0		0
Estimated cost of warranties	(16,500	)	0		0
Income before taxes	$163,000		$215,000		$93,500

The tax rates in effect are 2016, 40%; 2017 and 2018, 45%. All tax rates were enacted into law on January 1, 2016. No deferred income taxes existed at the beginning of 2016. Taxable income is expected in all future years.

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2016, 2017, and 2018.

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