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Ogilvey reported sales on account of $500,000 in 2021 and no permanent differences. The company...

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Accounting

Ogilvey reported sales on account of $500,000 in 2021 and no permanent differences. The company also reported an estimated product warranty liability and the related warranty expense of $110,000 for book purposes. There were no additional expenses in 2021.

Under tax law, Ogilvey cannot deduct the estimated warranty expense and does not create a tax liability for these amounts until it actually provides the services by repairing the product. Ignore cost of goods sold. Assume no operating expenses during the year. The companys tax rate is 21%

Required:

  1. What is Ogilveys income tax expense and income tax payable?
  2. Show the difference between the book carrying value and the tax basis of the warranty liability.
  3. Compute the deferred tax asset.
  4. What journal entries are required for the year to record the revenues, warranty expense, and related income tax?

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