(Two Temporary Differences, Tracked through 3 Years, Multiple Rates) Taxable income and pretax financial income would be identical for Jones 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 |
2012 |
2013 |
2014 |
|
Excess of revenues over expenses |
|||
|
(excluding two temporary differences) |
$160,000 |
$210,000 |
$90,000 |
|
Installment income collected |
8,000 |
8,000 |
8,000 |
|
Expenditures for warranties |
(5,000) |
(5,000) |
(5,000) |
|
Taxable income |
$163,000 |
$213,000 |
$93,000 |
|
Pretax financial income |
2012 |
2013 |
2014 |
|
Excess of revenues over expenses (excluding two temporary differences) |
$160,000 |
$210,000 |
$90,000 |
|
Installment gross profit earned |
24,000 |
–0– |
–0– |
|
Estimated cost of warranties |
(15,000) |
–0– |
–0– |
|
Income before taxes |
$169,000 |
$210,000 |
$90,000 |
The tax rates in effect are: 2012, 45%; 2013 and 2014, 40%. All tax rates were enacted into law on January 1, 2012. No deferred income taxes existed at the beginning of 2012. Taxable income is expected in all future years.
Instructions
Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2012, 2013, and 2014.