Question: Use the information for Jenny Corporation in E18 9 and assume

Use the information for Jenny Corporation in E18-9, and assume that the company reports accounting income of $155,000 in each of 2012 and 2013 and the warranty expenditures occurred as expected. No reversing difference exists other than the one identified in E18-9.
In BE Jenny Corporation recorded warranty accruals as at December 31, 2011, in the amount of $150,000. This reversing difference will cause deductible amounts of $50,000 in 2012, $35,000 in 2013, and $65,000 in 2014. Jenny’s accounting income for 2011 is $135,000 and the tax rate is 25% for all years. There are no future tax accounts at the beginning of 2011.

(a) Calculate the future income tax balances at December 31, 2012 and 2013.
(b) Calculate taxable income and income taxes payable for 2012 and 2013.
(c) Prepare the journal entries to record income taxes for 2012 and 2013.
(d) Prepare the income tax expense section of the income statements for 2012 and 2013, beginning with the line “Income before income taxes.”
(e) What trend do you notice in the amount of net income reported for 2012 and 2013 in part (d)? Is this a coincidence? Explain.

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