Computation of Deferred Taxes
Second difference: Warranty expense accrual (deductible amounts). This is expected to reverse according to the following schedule:
1998 ($14,000) times enacted rate (.3) = $4,200
1999 ($20,000) times enacted rate (.4) = $8,000
*What is this amount? What is its nature?
This firm has no deferred taxes to start.
Taxable income in 1996 is $400,000. Future years are expected to be profitable as well.