Reference no: EM133061584
Question - Sharp Company has two temporary differences between its income tax expense and income taxes payable. The information is shown below.
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2018
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2019
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2020
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Pretax financial income
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$462,000
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$500,500
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$519,750
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Excess depreciation expense on tax return
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(16,500)
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(22,000)
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(5,500)
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Excess warranty expense in financial income
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11,000
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5,500
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4,400
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Taxable income
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$456,000
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$484,000
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$518,650
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The income tax rate for all years is 40%.
Prepare the journal entry to record income tax expense, deferred income taxes, and income tax payable for 2016, 2017, and 2018.
Indicate how deferred taxes will be reported on the 2018 balance sheet, assuming there were no temporary differences prior to 2016. Sharp's product warranty is for 12 months.
Explain your reasoning. Use the blank area in the template following the journal entries to make your notes.
Prepare the income tax expense section of the income statement for 2018, beginning with the line "Pretax financial income."
Where appropriate, show all calculations leading to the final solution.
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