Question

On 1 January 20X3, Highmark Corp. had the following deferred tax balances:

Deferred income tax asset related to warranty	$	17,000
Deferred income tax liability related to capital assets	$	122,000

On this date, the net book value of capital assets was $1,770,000 and UCC was $1,460,000. There was a warranty liability of $42,000.

In 20X3, accounting income was $190,000. This included non-tax-deductible expenses of $44,000, dividend revenue (non-taxable) of $13,000, depreciation of $77,000, and a warranty expense of $40,000. Warranty claims paid were $53,000 and CCA was $101,000.

Required:
Provide the journal entry to record tax expense in 20X3. The enacted tax rate was 41% in 20X3. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

	Amount $
Accounting Income	190,000
Add: Non tax deductible expense	44,000
Less: Non Taxable Dividend Revenue	-13,000
Less: CCA depreciation in excess of Book depreciation	-24,000	=77000-101000
Less: Warranty deduction in excess of book expense	-13,000	=40000-53000
Taxable Income	184,000

Data	Account Titles	Debit $	Credit $
December 31,20X3	Income Tax expense	90,610
	Deferred Tax Assets (13,000 x 41% )		5,330
	Deferred Tax Liability (24,000 x 41% )		9,840
	Income Tax Payable ( 184,000 x 41% )		75,440