Teri Hatcher Inc., in its first year of operations, has the following differences between the book basis and tax basis of its assets and liabilities at the end of 2013.
| Book Basis | Tax Basis | |
| Equipment (net) | $404,100 | $332,000 |
| Estimated warranty liability | $200,500 | $ –0– |
It is estimated that the warranty liability will be settled in 2014. The difference in equipment (net) will result in taxable amounts of $21,600 in 2014, $33,300 in 2015, and $17,200 in 2016. The company has taxable income of $530,900 in 2013. As of the beginning of 2013, the enacted tax rate is 35% for 2013–2015, and 30% for 2016. Hatcher expects to report taxable income through 2016.
