Question

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 that there is no reversing difference other than the one identified in E18-9. In addition, assume now that Jenny Corporation was informed on December 31, 2012, that the enacted rate for 2013 and subsequent years is 28%.
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.
Instructions
(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.”


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  • CreatedAugust 23, 2015
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