Gidget Cat Co.s (GCC) accounting income before taxes was $500,000 in 2019, its first year of operations.
Question:
Gidget Cat Co.’s (GCC) accounting income before taxes was $500,000 in 2019, its first year of operations. Select information from the company’s financial records follow:
■ The company paid $10,000 for a golf club membership in 2019.
■ The net book value of GCC’s equipment at December 31, 2019, was $350,000; its undepreciated capital cost (UCC) was $320,000. GCC expects that this temporary difference will reverse in 2022.
■ GCC offers a two-year warranty on all products it sells. The balance of the provision for warranty at the end of 2019 was $45,000. GCC expects that $35,000 of the provision for warranty will be settled in 2020 and the remaining $10,000 will be settled in 2021.
■ The income tax rate for 2019 was 20%. During 2019, suppose the federal government announced that the tax rate would increase to 25% for 2020 and 30% for 2021.
Required:
Prepare the journal entries to record income tax expense for Gidget Cat Co.
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