Teri Hatcher 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 2008.

It is estimated that the warranty liability will be settled in 2009. The difference in equipment (net) will result in taxable amounts of $20,000 in 2009, $30,000 in 2010, and $10,000 in 2011. The company has taxable income of $520,000 in 2008. As of the beginning of 2008, the enacted tax rate is 34% for 2008€“2010, and 30% for 2011. Hatcher expects to report taxable income through 2011.
Instructions
(a) Prepare the journal entry to record income tax expense, deferred income taxes, and income tax payable for 2008.
(b) Indicate how deferred income taxes will be reported on the balance sheet at the end of2008.

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Book Basis Tax Basis $400,000 $200,000 $340,000 Equipment (net) Estimated warranty liability