The following information is available for the first two years of operations for Jackson, Inc.:
a The company sells its merchandise on an installment contract basis. In
Jackson, Inc. reported gross profit of $ tax purposes, and $ for
financial statement purposes. This will result in a taxable amount of $ in
b Jackson, Inc. insures the lives of its chief executives. The premiums paid amount
each year from is $ and this amount was shown as an expense on
the income statement.
c Product warranty expense accrued for financial reporting was $ in Actual
warranties paid and deducted on the tax returns was $ in The remainder
will be paid $ in and $ in
d Jackson, Inc. earns interest on Massachusetts taxexempt state bonds in the amounts
of $ each year in and
e In the company incurred a lawsuit which is probable and estimated at $ It
has been properly recorded as a litigation liability at and will be paid in
f Depreciation of property, plant and equipment for financial reporting purposes amounts
to $ each year for The company deducts the full cost under the
IRS Code Section $ amount allowed for tax purposes in
The enacted tax rates existing for December are and for and thereafter.
Instructions
a Complete the worksheet provided. It includes the following.
i Prepare a reconciliation of Book Income to Taxable Income for
ii Prepare a schedule of future taxable and deductible amounts at the end of
iii. Prepare a schedule of the deferred tax asset and liability at the end of
iv Prepare the journal entry to record income tax expense, deferred income taxes,
and income tax payable for
b Show how the deferred income taxes should be reported on the Balance Sheet at December
c Show how the taxes should be reported on the Income Statement at December
d Repeat a to g above for
Deferred Tax Worksheet
