Lance lawn services reports warranty expense by estimating the amount that eventually will be paid to satisfy warranties on its product sales. for tax purposes, the expense is deducted when the cost is incurred. at december 31, 2018, lance has a warranty liability of $1 million and taxable income of $75 million. at december 31, 2017, lance reported a deferred tax asset of $435,000 related to this difference in reporting warranties, its only temporary difference. the enacted tax rate is 40% each year. required: prepare the appropriate journal entry to record lance’s income tax provision for 2018.

Explanation:

The journal entry is shown below:

Income tax expense A/c Dr $30,035,000

       To Deferred tax asset A/c $35,000

       To Income tax payable A/c $30,000,000

(Being the income tax expense is recorded)

The computation is shown below:

For deferred tax asset:

= Deferred tax rate - Warrant liability × tax rate

= $435,000 - $1,000,000 × 40%

= $435,000 - $400,000

= $35,000

For income tax payable:

= Taxable income × tax rate

= $75,000,000 × 40%

= $30,000,000

forbearance of student loan payments. under forbearance, your loan payments are postponed (or reduced) but interest continues to accrue during the period of forbearance. if you don't pay the interest during that period, the interest may be “capitalized,” which means it is added to your principal balance.