Taxable income and pretax financial income would be identical for Huber Co. exce
ID: 2425429 • Letter: T
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
$171,400
$213,300
$93,100
9,300
9,300
9,300
(5,500
)
(5,500
)
(5,500
)
$175,200
$217,100
$96,900
Pretax financial income
2013
2014
2015
$171,400
$213,300
$93,100
27,900
–0–
–0–
(16,500
)
–0–
–0–
$182,800
$213,300
$93,100
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
Dec. 31, 2014
Dec. 31, 2015
Taxable income
2013
2014
2015
Excess of revenues over expenses (excluding two temporary differences)$171,400
$213,300
$93,100
Installment gross profit collected9,300
9,300
9,300
Expenditures for warranties(5,500
)
(5,500
)
(5,500
)
Taxable income$175,200
$217,100
$96,900
Pretax financial income
2013
2014
2015
Excess of revenues over expenses (excluding two temporary differences)$171,400
$213,300
$93,100
Installment gross profit earned27,900
–0–
–0–
Estimated cost of warranties(16,500
)
–0–
–0–
Income before taxes$182,800
$213,300
$93,100
Explanation / Answer
Comparison 2013 2014 2015
Income tax expense(GAAP) 73,120 95,985 41,895
Income tax payable(IRS) 70,080 97,695 43,605
Difference 3,040 (1,710) (1,710)
DEC'31,2013
Income tax Expense 73,120
Income tax payable 70,080
Deffered tax liability 3,040
DEC'31,2014
Income Tax Expense 95,985
Deferred Tax Asset 1,710
Income Taxes Payable 97,695
DEC'31,2015
Income Tax Expense 41,895
Deferred Tax Asset 1,710
Income Taxes Payable 43,605
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