Macinski Inc., in its first year of operations, has the following differences between the book basis and

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Macinski Inc., in its first year of operations, has the following differences between the book basis and tax basis of its assets and liabilities at the end of 2012.

It is estimated that the warranty liability will be settled in 2013. The difference in equipment (net) will result in taxable amounts of $20,000 in 2013, $30,000 in 2014, and $10,000 in 2015. The company has taxable income of $550,000 in 2012. As of the beginning of 2012, the enacted tax rate is 34% for 2012 2014, and 30% for 2015. Macinski expects to report taxable income through 2015.

Instructions
  (a) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2012.
  (b) Indicate how deferred income taxes will be reported on the balance sheet at the end of 2012.

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Intermediate Accounting

ISBN: 978-0470587287

14th Edition

Authors: kieso, weygandt and warfield.

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