EGR Company Provided You with the Following Information

question 62

Short Answer

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

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Definitions:

Salvage Value

The forecasted resale price of an asset at the end of its service life.

Depreciation Expense

An accounting method used to allocate the cost of a tangible or physical asset over its useful life, reflecting wear and tear, deterioration, or obsolescence of the asset.

Straight-line Method

A method of calculating depreciation for an asset, spreading the cost evenly over its useful life.

Salvage Value

The calculated remaining value of an asset at the close of its productive life.