Allsgood Appliances computed a pretax financial loss of $60,000 for the first year of its operations ended December 31,2014.Analysis of the tax and book basis of its liabilities disclosed $80,000 in accrued warranty expenses on the books that had not been deductible from taxable income in 2014,but would be deductible in future years when the warranty expenses were paid.
The future warranty payments are expected to occur in the following pattern:

The enacted tax rates for this year and the next four years are as follows:

Use the provisions of FASB Statement No.109.
(1)Prepare a schedule showing the reversal of the temporary difference and the computation of income taxes payable and deferred tax assets or liabilities as of December 31,2014.
(2)Prepare journal entries to record income taxes payable and deferred income taxes.
(3)Prepare the income statement for Allsgood beginning with "Income from continuing operations before income taxes" for the year ended December 31,2014.

Question

Allsgood Appliances computed a pretax financial loss of $60,000 for the first year of its operations ended December 31,2014.Analysis of the tax and book basis of its liabilities disclosed $80,000 in accrued warranty expenses on the books that had not been deductible from taxable income in 2014,but would be deductible in future years when the warranty expenses were paid.
The future warranty payments are expected to occur in the following pattern:
  
The enacted tax rates for this year and the next four years are as follows:
  
Use the provisions of FASB Statement No.109.
(1)Prepare a schedule showing the reversal of the temporary difference and the computation of income taxes payable and deferred tax assets or liabilities as of December 31,2014.
(2)Prepare journal entries to record income taxes payable and deferred income taxes.
(3)Prepare the income statement for Allsgood beginning with "Income from continuing operations before income taxes" for the year ended December 31,2014.

Quizplus · Accepted Answer

The Answer of Allsgood Appliances computed a pretax financial loss of $60,000 for the first year of its operations ended December 31,2014.Analysis of the tax and book basis of its liabilities disclosed $80,000 in accrued warranty expenses on the books that had not been deductible from taxable income in 2014,but would be deductible in future years when the warranty expenses were paid.
The future warranty payments are expected to occur in the following pattern:
  
The enacted tax rates for this year and the next four years are as follows:
  
Use the provisions of FASB Statement No.109.
(1)Prepare a schedule showing the reversal of the temporary difference and the computation of income taxes payable and deferred tax assets or liabilities as of December 31,2014.
(2)Prepare journal entries to record income taxes payable and deferred income taxes.
(3)Prepare the income statement for Allsgood beginning with "Income from continuing operations before income taxes" for the year ended December 31,2014.

Allsgood Appliances Computed a Pretax Financial Loss of $60,000 for the First