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Cash Inc. reports warranty expense when related products are sold. For tax purposes, the warranty...

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Accounting

Cash 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, Cash has a warranty liability of $500,000 and taxable income of $50,000,000. At the beginning of the current year, Cash reported a deferred tax asset of $100,000 related to the difference in reporting warranty expense, its only temporary difference. The enact tax rate is 22% each year.

PREPARE APPROPRIATE JOURNAL ENTRIES FOR THE CURRENT YEAR

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