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Christian Brown

Assignment Ch 16 – Intermediate Accounting II

2/24/2019

Step 1

2011

Net Income, before tax 625,000

Permanent Differences

Golf Club Dues +20,000

Dividends -5000

Accounting Income Subject to Tax 640,000

Timing Differences

Warranty Expense +22,000

Warranty Claims Paid -45,000

Depreciation +287,000

Capital Cost Allowance -395,000

Taxable Income 509,000

Enacted Tax Rate 40%

Income Tax Payable 203,600

Step 2

2011 Year-End Year-End Temporary Deferred Less Adjustment


tax basis accounting difference tax asset beginning for current
carrying deductible (liability) at balance year
value (taxable) year-end
Capital 856,000 1,276,000 (420,000) (168,000) (147,000) (21,000)
Assets
Warranty 0 (33,000) 33,000 13,200 19,600 (6,400)
Liability
Step 3

Dec 31, 2011 Income Tax Expense 231,000

Deferred income tax- warranty 6,400

Deferred income tax – Capital assets 21,000

Income tax payable 203,600

To record income tax expense for 2011

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