Use the information for Jenny Corporation in E18-16. Assume that the company reports accounting income of $155,000

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Use the information for Jenny Corporation in E18-16. Assume that the company reports accounting income of $155,000 in each of 2018 and 2019 and that the warranty expenditures occurred as expected. No reversing difference exists other than the one identified in E18-16.
In E18-16
Jenny Corporation recorded warranty accruals as at December 31, 2017 in the amount of $150,000. This reversing difference will cause deductible amounts of $50,000 in 2018, $35,000 in 2019, and $65,000 in 2020. Jenny's accounting income for 2017 is $135,000 and the tax rate is 25% for all years. There are no deferred tax accounts at the beginning of 2017.
Instructions
(a) Calculate the deferred tax balances at December 31, 2018 and 2019.
(b) Calculate taxable income and income tax payable for 2018 and 2019.
(c) Prepare the journal entries to record income taxes for 2018 and 2019.
(d) Prepare the income tax expense section of the income statements for 2018 and 2019, beginning with the line "Income before income tax."
(e) What trend do you notice in the amount of net income reported for 2018 and 2019 in part (d)? Is this a coincidence? Explain.
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Intermediate Accounting

ISBN: 978-1119048541

11th Canadian edition Volume 2

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy

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