At the End of Its First Year of Operations on December

question 95

Multiple Choice

At the end of its first year of operations on December 31, 2014, 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 2015 and $110,000 in 2016. The enacted income tax rates for 2014, 2015, and 2016 are 30%, 35%, and 40%, respectively. The journal entry to record income tax expense on December 31, 2014, would be

• A) Deferred Tax Asset \(\quad \)\(\quad \)\(\quad \)75,500
• Income Taxes Payable \(\quad \)\(\quad \)30,000
• Income Tax Benefits from
• Operating Loss Carryforward \(\quad \)\(\quad \)45,500
• B) Deferred Tax Asset\(\quad \)\(\quad \) 30,000
• Income Taxes Payable \(\quad \)\(\quad \)\(\quad \)\(\quad \)30,000
• C) Income Tax Expense\(\quad \)\(\quad \)\(\quad \) 30,000
• Income Taxes Payable \(\quad \)\(\quad \)30,000
• D) Deferred Tax Asset \(\quad \)\(\quad \)\(\quad \)105,500
• Income Taxes Payable \(\quad \)\(\quad \)30,000
• Income Tax Benefit from
• Operating Loss Carryforward \(\quad \)\(\quad \)75,500

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