Geyser Company beganoperations in 2017 and has provided the following information.
- Pretax financial income for 2017 is $200,000.
- The tax rate enacted for 2017 and future years is 40%.
- Differences between the 2017 income statement and tax returnare listed below:
- Warranty expense accrued for financial reporting purposesamounts to $10,000. Warranty deductions per the tax return amountto $4,000.
- Gross profit on construction contracts using thepercentage-of-completion method for book purposes amounts to$184,000. Gross profit on construction contracts for tax purposesamounts to $124,000.
- Depreciation of property, plant, and equipment for financialreporting purposes amounts to $60,000. Depreciation of these assetsamounts to $80,000 for the tax return.
- A $3,500 fine paid for violation of pollution laws was deductedin computing pretax financial income.
- Interest revenue earned on an investment in tax-exemptmunicipal bonds amounts to $1,400.
- Taxable income is expected for the next few years.
Provided with thisassignment is the Excel workbook containing the spreadsheets youwill need for this exercise.
Use the spreadsheetJournal Entries to prepare the journal entry torecord income tax expense, deferred taxes, and income taxes payablefor 2017.
Draft the income taxexpense section of the income statement, beginning with “Incomebefore income taxes”.
