Delmarva Company, During Its First Year of Operations in 2016

Essay

Delmarva Company, during its first year of operations in 2016, reported taxable income of $170,000 and pretax financial income of $100,000. The difference between taxable income and pretax financial income was caused by two timing differences: excess depreciation on tax return, $70,000; and warranty expenses in excess of warranty payments, $40,000. These two timing differences will reverse in the next three years as follows: Enacted tax rates are 30% for 2016, 35% for 2017 and 2018, and 40% for 2019.
Required:
Prepare the income tax journal entry for Delmarva Company for December 31, 2016.