Future Income Taxes
Pan Corp Estimated Warranty Expenses of $ 530,000 Will Be Deductible in Its

question 25

Essay

Future income taxes
Pan Corp., at the end of 2020, its first year of operations, prepared a reconciliation between pre-tax accounting income and taxable income as follows: $\begin{array}{lr}\text { Pre-tax account ing income } & \$ 300,000 \\\text { Estimated warranty expenses deductible when paid } & 800,000 \\\text { Excess CCA } & (600,000) \\\text { Taxable income } & \$ 500,000\end{array}$ Estimated warranty expenses of $ 530,000 will be deductible in 2021, $ 200,000 in 2022, and $ 70,000 in 2023. The use of the depreciable assets will result in taxable amounts of $ 200,000 in each of the next three years.
The enacted tax rate is 30% and is not expected to change.
Instructions
a) Prepare a schedule of the future taxable and deductible amounts.
b) Prepare the required adjusting journal entries to record income taxes for 2020.

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