Pocus Inc Reports Warranty Expense When Related Products Are Sold

question 127

Essay

Pocus Inc. reports warranty expense when related products are sold. For tax purposes, the warranty costs are deductible as incurred. At the end of the current year, Pocus has a warranty liability of $500,000 and taxable income of $50,000,000. At the beginning of the current year, Pocus reported a deferred tax asset of $210,000 related to the difference in reporting warranty expense, its only temporary difference. The enacted tax rate is 40% each year.
Required:
Prepare the appropriate journal entry for Pocus to record the income tax provision for the current year. Show well-labeled computations to support the three amounts in your journal entry.

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Definitions:

Strategic Marketing Process

A structured approach organizations use to plan, execute, and manage their marketing strategies aimed at achieving competitive advantage and meeting consumer needs.

Marketing Program

An organized strategy that combines various promotional tools and activities to achieve specific marketing objectives.

Evaluation Phase

A stage in the consumer decision-making process where alternatives are assessed and judged leading to a purchase decision.

Strategic Marketing Process

An organized method for developing, implementing, and overseeing marketing tactics to meet organizational goals.