E19-8B (Two Temporary Differences, One Rate, 3 Years)Tipper Company has two temporary differences between its income tax expense and income taxes payable. The following information is available. 2014 2015 2016 Pretax financial income $225,000 $268,000 $

E19-8B (Two Temporary Differences, One Rate, 3 Years)Tipper Company has two temporary differences between its income tax expense and income taxes payable. The following information is available.

                                                                                            2014                       2015                    2016    

Pretax financial income                                             $225,000               $268,000            $365,000 

Excess of depreciation expense on tax return       (20,000)                (15,000)               (20,000)

Excess of warranty expense on financial income   10,000                   15,000                 16,000 

Taxable income                                                           $215,000               $268,000             $361,000 

The income tax rate for all years is 30%.

Instructions

(a) Prepare the journal entry to record income tax expense, deferred income taxes, and income tax payable for 2014, 2015, and 2016.

(b) Assuming there were no temporary differences prior to 2014, indicate how deferred taxes will be reported on the 2015 balance sheet. Tipper’s product warranty is for 12 months.

(c) Prepare the income tax expense section of the income statement for 2015, beginning with the line

“Pretax financial income.”