The differences between the book basis and tax basis of the assets and liabilities of Host Five Inc. at the end of 2014 are presented below.

It is estimated that the warranty accrual will be settled in 2015 ($75,000) and 2016 ($45,000). The difference in accounts receivable will result in taxable amounts of $60,000 in 2015, 2016, and 2017. The company has taxable income of $200,000 in 2014 and is expected to have taxable income in each of the following 3 years. Its enacted tax rate is 35% for all years. This is the company’s first year of operations.

(a) Prepare the journal entry to record income tax expense, deferred income taxes, and income tax payable for 2014.
(b) Indicate how deferred income taxes will be reported on the balance sheet at the end of2014.

  • CreatedJune 07, 2013
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