1,2) (Two Temporary Differences, One Rate, 3 Years) Button Company has the follo

Question

1,2) (Two Temporary Differences, One Rate, 3 Years) Button Company has the following two temporary differ- ences between its income tax expense and income taxes payable. Exercises 1097 2017 2019 $945,000 2018 Pretax financial income Excess depreciation expense on tax return Excess warranty expense in financial income Taxable income $840,000 $910,000 (30,000) 20,000 (40,000) (10,000) 8,000 10,000 5880,000 $830,000 $943,000 The income tax rate for all years is 40%. Instructions a) Asuming there wee no temporary differences priorto 2017, prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2017, 2018, and 2019 b) Indicate how deferred taxes will be reported on the 2019 balance sheet. Button's product warranty is for 12 months. (c) Prepare the income tax expense section of the income statement for 2019, beginning with the line "Pretax financial income."

Explanation / Answer

Requirement 1 Amount in $ Date General Jounral Debit Credit 2017 Income tax expense 336000 Deferred tax asset 8000 Income taxes payable 332000 Deferred tax Liability 12000 To record the income tax expense 2018 Income tax expense 364000 Deferred tax asset 4000 Income taxes payable 352000 Deferred tax Liability 16000 To record the income tax expense 2019 Income tax expense 378000 Deferred tax asset 3200 Income taxes payable 377200 Deferred tax Liability 4000 To record the income tax expense Requirement 2 2019 Balance sheet(partial) Asset Current asset Deferred Tax Asset 15200 Liability Long term Liability Deffered tax Liability 32000 Requirement 3 Income Statement for 2019(partial) Pretax Financial Income 945000 Less : Income tax expense Deffered taxes 800 Income taxes 377200 Net Income 567000

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