Reference no: EM132764408
Question - At the end of 2014, Classic Coverings had a $70,500 credit balance in its deferred income tax account. The income tax rate was 30%. The company reports under ASPE. This credit balance was due to the following two temporary differences:
Total accumulated depreciation for accounting purposes, $170,000, and for income tax purposes, $425,000. The related asset has a five-year total life and an original cost of $555,000.
Warranty expense to date for accounting purpose, $555,000, and for income tax purposes, $535,000. The warranty is a 12-month warranty on products sold.
a) Prepare the year end journal entry to record the warranty expense for 2014. Note that for income tax purposes the warranty amount deductible is equal to the cash paid for warranties. Enter an appropriate description, and enter the date in the format dd/mmm (ie. 15/Jan). Please make sure your final answer(s) are accurate to 2 decimal places.
b) Calculate the deferred income tax balances for the fixed asset and the warranty. Enter 0 for any amount that is 0. Use positive numbers for assets and negative numbers for liabilities. Please make sure your final answer(s) are accurate to the nearest whole number.
c) Enter the deferred income tax balances from b) under their correct classifications. Please make sure your final answer(s) are accurate to the nearest whole number.
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