Wilcox Company has prepared the following reconciliation of its pretax financial income with its taxable...
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Accounting
Wilcox Company has prepared the following reconciliation of its pretax financial income with its taxable income for 2016:
Pretax financial incom
Pretax financial income
$3000
Add:
estimated expense on 1-year warranties recognized for financial reporting in excess of actual warranty costs deducted for income taxes
100
Less:
MACRS depreciation deducted for income taxes in excess of depreciation recognized for financial reporting
150
Taxable Income
2950
At the beginning of 2016, Wilcox had a deferred tax liability of $495. The current tax rate is 30%, and no change in the tax rate has been enacted for future years. At the end of 2016, Wilcox anticipates that actual warranty costs will exceed estimated warrany expense by $100 next year and that financial depreciation will exceed tax depreciation by $1800 in future years. Wilcox has earned income in all past years and expects to earn income in the future.
Required:
1. Prepare Wilxcox's income tax journal entry at the end of 2016
2. Prepare the lower portion of Wilcox's 2016 income statement.
3. Show how the income tax items are reported on Wilcox's December 31, 2016 Balance Sheet.
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