Question

Taxable income and pretax financial income would be identical for Skysong 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 2019 2020 2021 Excess of revenues over expenses (excluding two temporary differences) $148,000 $227,000 $96,400 Installment gross profit collected 8,400 8,400 8,400 Expenditures for warranties (5,500 ) (5,500 ) (5,500 ) Taxable income $150,900 $229,900 $99,300 Pretax financial income 2019 2020 2021 Excess of revenues over expenses (excluding two temporary differences) $148,000 $227,000 $96,400 Installment gross profit recognized 25,200 -0- -0- Estimated cost of warranties (16,500 ) -0- -0- Income before taxes $156,700 $227,000 $96,400 The tax rates in effect are 2019, 40%; 2020 and 2021, 45%. All tax rates were enacted into law on January 1, 2019. No deferred income taxes existed at the beginning of 2019. 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 2019, 2020, and 2021.

Answer 1

Step-by-step explanation:

This question was computed in an Excel SOlver and the result are shown below:

Date Particulars Debit($) Credit($)

31-Dec-19 Income tax expense 62970

Deferred tax asset 4950

Income taxes payable 60360

Deferred tax liability 7560

(To record income tax expense

for the year)

31-Dec-20 Income tax expense 102150

Deferred tax asset 3780

Income taxes payable 103455

Deferred tax asset 2475

(To record income tax expense

for the year)

31-Dec-21 Income tax expense 43380

Deferred tax liability 3780

Income taxes payable 44685

Deferred tax Asset 2475

(TO record income tax expense

for the year)