Prepare schedule to compute carrot ending deferred tax asset

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Reference no: EM131954912

Question: Carrot Company has been profitable in the past and expects to remain profitable in the future. Carrot sells a product for which it provides a 5 year warranty. For financial reporting purposes, Carrot estimates its future warranty costs and records a warranty expense and liability at year end, whereas for income tax purposes the company deducts its warranty costsvwhen when paid. At the beginning of the current year, Carrot had a deferred tax asset ofb $500 related to the warranty liability on its balance sheet. At the end of the current year, the company estimates that itstock ending warranty liability is $2,000. Carrot had current year taxable income of $10,000 and is subject to an enacted future tax rate of 30%. Prepare a schedule to compute Carrot's

(a) ending future deductible amount,

(b) ending deferred tax asset, and

For those seeking boxes in which you must enter subtractive or negative number, use a minus sign.

Reference no: EM131954912

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