The information that follows pertains to Esther Food Product

The information that follows pertains to Esther Food Products: a. At December 31, 2016, temporary differences were associated with the following future taxable (deductible) amounts: Depreciation Prepaid expenses Warranty expenses $46,000 19,000 (16,000) b. No temporary differences existed at the beginning of 2016. c. Pretax accounting income was $65,000 and taxable income was $16,000 for the year ended December 31, 2016 d. The tax rate is 40% Required Complete the following table given below and prepare the appropriate journal entry to record income taxes for 2016. (lf no entry is required for a transaction/event, select \"No journal entry required\" in the first account field. Negative amounts should be entered with a minus sign.) x Tax Rate Tax $ Recorded as Pretax accounting income Permanent differences S 65,000 o permanent differences Income subiect to taxation Temporary Differences 65,000 x 0 ation aid expenses arranties Income taxable in current year S 65,000 x

Solution

x Tax Rate Tax $ Recorded as: Pretax accounting income 65000 Permanent Differences No permanent difference Income subject to taxation 65000 x 0.4 = 26000 Income Tax Expense Temporary differences Depreciation 46000 x 0.4 = 18400 Deferred Tax Asset Prepaid expense 19000 x 0.4 = 7600 Deferred Tax Asset Warranties -16000 x 0.4 = -6400 Deferred Tax Liability Income taxable in the current year 114000 x 0.4 = 45600 Income Tax Liability General Journal Debit $ Credit $ Income Tax Expense 26000 Deferred Tax Asset 18400 Deferred Tax Asset 7600 Deferred Tax Liability 6400 Income Tax Liability 45600