Macinski Inc., in its first year of operations, has the following differences between the book basis and tax basis of its assets and liabilities at the end of 2022.

It is estimated that the warranty liability will be settled in 2023. The difference in equipment (net) will result in taxable amounts of $20,000 in 2023, $30,000 in 2024, and $10,000 in 2025. The company has taxable income of $550,000 in 2022. As of the beginning of 2022, the enacted tax rate is 34% for 2022–2024, and 30% for 2025. Macinski expects to report taxable income through 2027.

Instructions

a. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2022.

b. Indicate how deferred income taxes will be reported on the statement of financial position at the end of 2022.

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Book Basis Tax Basis Equipment (net) Estimated warranty liability $400,000 $340,000 150,000 -0-