Fairfax Company had a balance in Deferred Tax Liability of $840 on December 31, 2016, resulting from depreciation timing differences. Differences in tax and accounting depreciation for assets purchased on January 1, 2016, are as follows:
 

In addition to the 2016 depreciation timing difference, Fairfax Company expensed $2,000 of warranty costs that will be deducted for tax purposes when paid in future years. Fairfax's pretax financial income in 2016 was $35,800. The 2016 income tax rate was 35%, and no changes in the tax rate for future years have been enacted.

Required:

1)    Compute the taxable income for 2016.

2)    Prepare the income tax journal entry for the Fairfax Company for December 31, 2016.

Transcribed Image Text:

Financial Таx Year Depreciation Depreciation 2016 $ 4,000 $ 6,800 2017 4,000 5,200 2018 4,000 2,400 2019 4,000 1,600 $16,000 $16,000 Financial Таx Year Depreciation Depreciation 2016 $ 4,000 $ 6,800 2017 4,000 5,200 2018 4,000 2,400 2019 4,000 1,600 $16,000 $16,000

Answer rating: 100% (QA)

Taxable Income Financial income add financial depreciation less tax d... View the full answer