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    Income Tax Expenses and Warranties

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    White Industries started their operations on January 1, 20X3 and recorded $400,000 in warranty expense during the year. The warranty expense was the only difference between the company's pretax financial income and its tax return income of $900,000. White will be required to pay these warranties at a rate of $100,000 per year beginning in 20X4. Although White fully expects to earn in excess of $100,000 in 20X4 and 20X5, the company believes it is more likely than not that it will incur a loss after 20X5. The enacted tax rate is 25% in current and future periods. What will White record as its income tax expense in 20X3?

    © BrainMass Inc. brainmass.com June 3, 2020, 10:49 pm ad1c9bdddf
    https://brainmass.com/business/accounting/income-tax-expenses-warranties-251537

    Solution Summary

    This solution determines what a company should record as its income tax expense.

    $2.19

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