Button Company Has Two Temporary Differences Between Its Income Tax

Button Company has two temporary differences between its income tax expense and income taxes payable. The information is shown below.

Button Company has two temporary differences between its income

The income tax rate for all years is 40%.
Instructions
(a) Prepare the journal entry to record income tax expense, deferred income taxes, and income tax payable for 2008, 2009, and 2010.
(b) Assuming there were no temporary differences prior to 2008, indicate how deferred taxes will be reported on the 2010 balance sheet. Button’s product warranty is for 12 months.
(c) Prepare the income tax expense section of the income statement for 2010, beginning with the line “Pretax financialincome.”

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