Question

Exercise 19-8 Sunland Company has the following two temporary differences between its income tax expense and income taxes payable. 2017 2018 2019 Pretax financial income $811,000 $932,000 $992,000 Excess depreciation expense on tax return (31,500 ) (39,100 ) (9,900 ) Excess warranty expense in financial income 19,900 9,800 8,300 Taxable income $799,400 $902,700 $990,400 The income tax rate for all years is 40%.

Assuming there were no temporary differences prior to 2017, prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2017, 2018, and 2019. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit
2017
Income Tax Expense	324400
Deferred Tax Asset	???
Income Tax Payable		319760
Deferred Tax Liability		???
2018
Income Tax Expense	372800
Deferred Tax Asset	???
Income Tax Payable		361080
Deferred Tax Liability		???
2019
Income Tax Expense	396800
Deferred Tax Asset	???
Income Tax Payable		396160
Deferred Tax Liability		????

Indicate how deferred taxes will be reported on the 2019 balance sheet. Sunland’s product warranty is for 12 months.

Sunland	Company
Balance	Sheet
December 31	2019
Non-Current Liabilities
Deferred Tax Liability	???

Prepare the income tax expense section of the income statement for 2019, beginning with the line “Pretax financial income.” (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

	Sunland Company
	Income Statement (Partial)
	For the Year Ended December 31, 2019
?????????		$992000
Income Tax Expense
Current	39160
Deferred	????
		???
Net Income/Loss		???

Accounts for Income Statement

Current, Deferred, Dividends, Expenses, Income Tax Expense, Net Income/Loss, Pretax Financial Income,

Retained Earnings Jan 1, Retained Earnings Dec 31, Revenues, Total Expenses, Total Revenues

The question marks are where I am stuck, Everything else in the problem is correct.

Answer 1

Answer: Part 1

Account Titles and Explanation	Debit	Credit
2017
Income Tax Expense	3,24,400
Deferred Tax Asset(19900*40%)	7,960
Income Tax Payable		3,19,760
Deferred Tax Liability($31,500 x 40%)		12,600
2018
Income Tax Expense	3,72,800
Deferred Tax Asset ($9,800 x 40%)	3,920
Income Tax Payable		3,61,080
Deferred Tax Liability ($39,100 x 40%)		15,640
2019
Income Tax Expense	3,96,800
Deferred Tax Asset($8,300 x 40%)	3,320
Income Tax Payable		3,96,160
Deferred Tax Liability ($9,900 x 40%)		3,960

Part;2

Sunland	Company
Balance	Sheet
Dec-31	2019
Non-Current Liabilities
Deferred Tax Liability(12,600 + 15,640 + 3960)	32,200

Part 3

Sunland Company
Income Statement (Partial)
For the Year Ended December 31, 2019
Pre tax Fedral incom		$992,000
Income Tax Expense
Current($990,400*40%)	3,96,160
Deferred($396,800-396,160)	640
		3,96,800
Net Income/Loss		5,95,200