Wilcox Company has prepared the following reconciliation of its pretax financial income with its taxable income for 2016:   

  

      

  

At the beginning of 2016, Wilcox had a deferred tax liability of $495. The current tax rate is 30%, and no change in the tax rate has been enacted for future years. At the end of 2016, Wilcox anticipates that actual warranty costs will exceed estimated warranty expense by $100 next year and that financial depreciation will exceed tax depreciation by $1800 in future years. Wilcox has earned income in all past years and expects to earn income in the future.
 

Required: 

1. Prepare Wilcox’s income tax journal entry at the end of 2016. 

2. Prepare the lower portion of Wilcox’s 2016income statement.

3. Show how the income tax items are reported on Wilcox’s December 31, 2016, balance sheet. 

4. Next Level If Wilcox uses IFRS, how would your answer to Requirement 3 change?

Transcribed Image Text:

Pretax financial income $3,000 Add: Estimated expense on 1-year warranties recognized for financial reporting in excess of actual warranty costs deducted for income taxes MACRS depreciation deducted for income taxes in excess of depreciation recognized for financial reporting 100 Less: (150 $2,950 Taxable income Pretax financial income $3,000 Add: Estimated expense on 1-year warranties recognized for financial reporting in excess of actual warranty costs deducted for income taxes MACRS depreciation deducted for income taxes in excess of depreciation recognized for financial reporting 100 Less: (150 $2,950 Taxable income

Answer rating: 100% (QA)

Step 1 of 5 A At the end of 2013 pretax financial income of WC is 3000 So its income tax expense wil... View the full answer