Question

What are the journal Entries on the financial side and the tax side for the following:...

What are the journal Entries on the financial side and the tax side for the following:

Compensation

Advances

Estimated Expenses

Also please find the underlying balance sheet account where the Book Value is different from the tax basis and so causes the temporary difference. And is it a Deferred Tax asset or Deferred Tax Liability

For Example, for Warranties

On financial side it would be:

Dr. Warranty Expense

Cr. Warranty Payable

Dr. Warranty Payable

Cr. Cash

And on the Tax side it would have:

No journal entries for the first year.

Then...

Dr. Warranty Expense

Cr. Cash

SO Warranty Payable is the difference and it is a liability.

Business   Accounting   
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Homework Answers

Answer #1

On the financial side

A)compensation expense Dr

compensation payable Cr

compensation payable Dr

cash Cr

On the tax side

compensation expense Dr

cash Cr

Difference compensation payable

B)for making the advance payments:
Advance A/c Dr
Bank A/c Cr

on Advance receipt from Debtors:

Bank A/c Dr
Cr Advance from Debtors/customer

C)

Debit Product Warranty Expense (estimate)
          Credit Product Warranty Liability  (estimate)
Fiscal Period End adjustment to record estimated product warranty expense

Debit Product Warranty Liability  (actual)
          Credit Merchandise Inventory     (actual)
Replacement of merchandise under warranty

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