At the End of Its First Year of Operations on December

question 68

Short Answer

At the end of its first year of operations on December 31, 2016, the Brandon Company reported taxable income of $100,000 and had a pretax financial loss of $60,000. Differences between taxable income and pretax financial income included interest revenue received from municipal obligations of $20,000 and warranty expense accruals of
$180,000. Warranty expenses of $90,000 are expected to be paid in 2017 and $110,000 in 2018. The enacted income tax rates for 2016, 2017, and 2018 are 30%, 35%, and 40%, respectively. The journal entry to record income tax expense on December 31, 2016, would be

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Definitions:

Flow Variable

An economic measurement that describes quantities which are measured over a specified period of time, such as income, expenses, or investment.

Foreign Currency Reserve

Refers to the foreign currencies held by a central bank or a monetary authority, used to support its liabilities, stabilize its currency, and finance trade imbalances.

Income

The money received, especially on a regular basis, for work or through investments.

Opportunity Cost

The price paid for not choosing the next most favorable option when deciding or picking between different possibilities.