Pocus, Inc., reports warranty expense when related products are sold. For tax purposes, the warranty costs are
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Question:
Pocus, Inc., reports warranty expense when related products are sold. For tax purposes, the warranty costs are deductible as incurred. At the end of the current year, Pocus has a warranty liability of $200,000 and taxable income of $20,000,000. At the end of the previous year, Pocus reported a deferred tax asset of $80,000 related to the difference in reporting warranty expense, its only temporary difference. The enacted tax rate is 30% each year.
Prepare the appropriate journal entry for Pocus to record the income tax provision for the current year. Show well-labeled supporting computations.
Related Book For
Intermediate Accounting
ISBN: 978-0324659139
11th edition
Authors: Loren A. Nikolai, John D. Bazley, Jefferson P. Jones
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