Question - Hunt co. at the end of 2015, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follow:
Pretax financial income $750,000
Estimated warranty expenses deductible for taxes when paid 1,200,000
Extra deprecation (1,650,000)
Taxable income $300,000
Estimated warranty expense of $800,000 will be deductible in 2016, $300,000 in 2017, and $100,000 in 2018. The use of the depreciable assets will result in taxable amounts of $550,000 in each of the next three years.
Instructions - Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2015, assuming an income tax rate of 40% for all years.