Turnabout Enterprises provided the following information regard-ing book- tax differences for its first year of operations:

Installment sales are a normal part of Turnabout€™s operations and so any deferred taxes related to them would be classified as current. The depreciation expense is related to a building costing $ 1,600,000. Income before including any of the book- tax differences above is $ 920,000. The firm expects to fully realize all deferred tax assets, so no allowance account is needed. Turnabout is subject to a 40% income tax rate. Assume the sales relating to the warranty liability occurred at year end.
Required
a. Prepare the journal entry/ entries required to record the tax provision for the current year.
b. Classify the deferred tax accounts on the balance sheet as of the end of the current year.

Transcribed Image Text:

Source of Book- Tax Difference Installment Sales: Income Recognized 2-year Warranty Costs: Warranty Expense Depreciation Expense GAAP Tax $500,000 S100,000 40.000 80,000 120,000 60,000