Taxable income and pretax financial income would be identical for Huber Co. exce

Question

Taxable income and pretax financial income would be identical for Huber Co. except for its treatments of gross profit on installment sales and estimated costs of warranties. The following income computations have been prepared.

Taxable income 2013 2014 2015

Excess of revenues over expenses (excluding two temporary differences) $164,400 $229,200 $93,200

Installment gross profit collected 8,100 8,100 8,100

Expenditures for warranties (5,800 ) (5,800 ) (5,800 )

Taxable income $166,700 $231,500 $95,500

Pretax financial income 2013 2014 2015

Excess of revenues over expenses (excluding two temporary differences) $164,400 $229,200 $93,200

Installment gross profit earned 24,300 –0– –0–

Estimated cost of warranties (17,400 ) –0– –0–

Income before taxes $171,300 $229,200 $93,200

The tax rates in effect are 2013, 40%; 2014 and 2015, 45%. All tax rates were enacted into law on January 1, 2013. No deferred income taxes existed at the beginning of 2013. Taxable income is expected in all future years. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2013, 2014, and 2015. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date Account Titles and Explanation Debit Credit

Dec. 31, 2013 - 4 ENTRIES

DEC. 31, 2014 - 4 ENTRIES

DEC 31, 2015- 4 ENTRIES

Explanation / Answer

Answer 1 Enteries for Dec 31, 2013

Account Name Debit Credit   

1. Income Tax expenses 66680

Income Tax Payable 66680

2. Profit & Loss A/c 66680

Income Tax Expenses 66680

3. Profit & Loss A/c     1840

Deferred Tax 1840

4. Deferred Tax 1840

Deferred Tax Payable 1840

Answer 2 : Enteries for Dec 31, 2014

     Account Name   Debit Credit   

1. Income Tax expenses 104175

Income Tax Payable 104175

2. Profit & Loss A/c 104175

Income Tax Expenses 104175

3. Deferred Tax 805

Profit & Loss A/c 805

4. Deferred Tax Payable 805   

Deferred Tax 805

Answer 2 : Enteries for Dec 31, 2015

     Account Name   Debit Credit   

1. Income Tax expenses 42975

Income Tax Payable 42975

2. Profit & Loss A/c 42975

Income Tax Expenses 42975

3. Deferred Tax 1035

   Profit & Loss A/c 1035

4.    Deferred Tax Payable 1035

Deferred Tax 1035

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