EGR Company Provided You with the Following Information

question 49

Essay

EGR Company provided you with the following information:
2013 Net Income: $1,500,000 2014 Net Income: $900,000 2013 Tax rate: 35%
2014 Tax rate: 40%
In addition, the only difference between accounting and tax are warranty costs accrued of $100,000 i 2013.No actual warranty expenses were incurred in 2013 or 2014.Prepare journal entries for 2013 and 2014 to record income tax expense.

---

Definitions:

Short Run

A period during which at least one factor of production is fixed, limiting the ability of a firm to adjust to changes in demand or production levels.

Average Costs

The total cost of production divided by the number of units produced, representing the cost per unit of production.

Shut-Down

The process of ceasing operations or closing a business temporarily or permanently.

Hold-Up Problem

Arises in business and negotiation when one party has the opportunity to exploit the other in a contractual agreement, often after making a relationship-specific investment.