E18.18 (LO 1, 4) (Two Differences, No Beginning Deferred Taxes, Multiple Rates) 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 2025.

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

It is estimated that the warranty liability will be settled in 2026. The difference in equipment (net) will result in taxable amounts of $20,000 in 2026, $30,000 in 2027, and $10,000 in 2028. The company has taxable income of $550,000 in 2025. As of the beginning of 2025, the enacted tax rate is 34% for 2025–2027, and 30% for 2028. Macinski expects to report taxable income through 2030.

Instructions

a. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2025.

b. Indicate how deferred income taxes will be reported on the statement of financial position at the end of 2025.