Prepare the journal entry to record income tax expense

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Question -         

Taxable income and pretax financial income would be identical for Skysong Co. except for its treatments of gross profit on installment sales and estimated costs of warranties. The following income computations have been prepared.

Taxable income

2016

2017

2018

Excess of revenues over expenses (excluding two temporary differences)

$148,000

$227,000

$96,400

Installment gross profit collected

8,400

8,400

8,400

Expenditures for warranties

(5,500)

(5,500)

(5,500)

   Taxable income

$150,900

$229,900

$99,300





Pretax financial income

2016

2017

2018

Excess of revenues over expenses  (excluding two temporary differences)

$148,000

$227,000

$96,400

Installment gross profit recognized

25,200

0

0

Estimated cost of warranties

(16,500)

0

0

Income before taxes

$156,700

$227,000

$96,400

The tax rates in effect are 2016, 40%; 2017 and 2018, 45%. All tax rates were enacted into law on January 1, 2016. No deferred income taxes existed at the beginning of 2016. Taxable income is expected in all future years.

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2016, 2017, and 2018.

Reference no: EM131566675

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