Question

Larkspur Company has the following two temporary differences between its income tax expense and income taxes payable.

		2020			2021			2022
Pretax financial income		$856,000			$898,000			$974,000
Excess depreciation expense on tax return		(29,100	)		(39,100	)		(10,400	)
Excess warranty expense in financial income		20,600			9,500			7,600
Taxable income		$847,500			$868,400			$971,200

The income tax rate for all years is 20%.

Assuming there were no temporary differences prior to 2020, prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020, 2021, and 2022

Answer 1

(a) 2012

Income Tax Expense. $171200

Deferred Tax Asset. $4120

($20,600 X 40%)

Deferred Tax Liability (29100 X 20%). $ 5820

Income Taxes Payable 847500 X 20%. $169500

2013

Income Tax Expense. $179600

Deferred Tax Asset ($9500 X 20%). $1900

Deferred Tax Liability ($39100 X 20%). $7820

Income Taxes Payable 868400 X 20%). $173680

2014

Income Tax Expense. $194800

Deferred Tax Asset (7600 X 20%). $1520

Deferred Tax Liability ($10,400 X 20%). $2080

Income Taxes Payable ($971200 X 20%). $194240