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F68) White Industries started their operations on January 1, Year 1 and recorded $400,000 in warranty expense during the year. Warranty expense was...
For Michael I. Please see attachment, it is clearer.White Industries started their operations on January 1, Year 1 and recorded $400,000 in warranty expense during the year. Warranty expense was the only difference between the company's pretax financial income and its tax return income of $900,000. White will be required to pay these warranties at a rate of $100,000 per year beginning in Year 2. Although White fully expects to earn in excess of $100,000 in Year 2 and Year 3, the company believes it is more likely than not that it will incur a loss after Year 3. The enacted tax rate is 25% in current and future periods. What will White record as its income tax expense in Year 1?A. $100,000 B. $125,000 C. $175,000 D. $225,000Erika’s Surf Shop had taxable income in Year 2 of $500,000 and pretax financial income of $600,000. The company had a cumulative $200,000 difference between its taxable income and pretax financial statement income at December 31, Year 1. These differences were solely related to accelerated depreciation methods used for income tax purposes. The enacted tax rate increased to 30 percent in Year 2 compared to an enacted rate of 20 percent in the prior year. At December 31, Year 2, the company would record a deferred tax expense of:A. $40,000 B. $50,000 C. $90,000 D. $150,000For the year ended December 31, Laramie Industries has a depreciation expense per its tax return greater than its financial statement tax expense, and had recorded warranty expense (associated with a one-year guarantee on its products) in its financial statements. Pretax income is less than tax return income as a result of these reconciling items. As a result of these transactions, Laramie will display:A. A current deferred tax asset and noncurrent deferred tax liabilityB. A noncurrent deferred tax asset and a current deferred tax liabilityC. A net current tax assetD. A net noncurrent tax asset
