Journey Entry Help - Accounting homework help

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Johnny Bravo Company began operations in 2015 and has provided the following information.

  1. Pretax financial income for 2015 is $100,000.
  2. The tax rate enacted for 2015 and future years is 40%.
  3. Differences between the 2015 income statement and tax return are listed below.
    1. Warranty expense accrued for financial reporting purposes amounts to $5,000. Warranty deductions per the tax return amount to $2,000.
    2. Gross profit on construction contracts using the percentage-of-completion method for book purposes amounts to $92,000. Gross profit on construction contracts for tax purposes amounts to $62,000.
    3. Depreciation of property, plant, and equipment for financial reporting purposes amounts to $60,000.
    4. Depreciation of these assets amounts to $80,000 for the tax return.
    5. A $3,500 fine paid for violation of pollution laws was deducted in computing pretax financial income.
    6. Interest revenue earned on an investment in tax-exempt municipal bonds amounts to $1,400.
  4. Taxable income is expected for the next few years.

Use the spreadsheet Journal Entries to prepare the journal entry to record income tax expense, deferred taxes, and income taxes payable for 2015.

Draft the income tax expense section of the income statement, beginning with “Income before income taxes”

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Explanation & Answer

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Prepare the journal entries to record the following.

Dec 31, 15 Deferred Tax Assets
Income Tax Expense

1.200
1.200

Temporary excess warranty expense per books, and resulting recognition of deferred tax assets.

Dec 31, 15 Income Tax Expense
Deferred Tax Liability

12.000
12.000

Excess profit as per book account of $30000, and resulting recognition of deferred tax liabil...


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