Intermediate Accounting II
Teri Inc., in its first year of operations, has thefollowing differences between the book basis and tax basis of itsassets and liabilities at the end of 20x0.
BookBasis Tax Basis
Equipment(net) $400,000 $340,000
Estimated warrantyliability $200,000 $ -0-
It is estimated that the warrantyliability will be settled in 20x1. The difference in equipment(net) will result in taxable amounts of $20,000 in 20x1, $30,000 in20x2, and $10,000 in 20x3. The company has taxable income of$520,000 in 20x0. As of the beginning of 20x0, its enacted tax rateis 34% for 20x0-20x2, and 30% for 20x3. Teri expects to reporttaxable income through 20x3.
Prepare the journal entry to recordincome tax expense, deferred income taxes, and income tax payablefor 20x0.
