one difference multiple rates effect of beginning balance 251375

(One Difference, Multiple Rates, Effect of Beginning Balance versus No Beginning Deferred Taxes) At the end of 2010, Wasicsko Company has $180,000 of cumulative temporary differences that will result in reporting future taxable amounts as follows.

2011 $ 70,000

2012 50,000

2013 40,000

2014 20,000

$180,000

Tax rates enacted as of the beginning of 2009 are:

2009 and 2010 40%

2011 and 2012 30%

2013 and later 25%

Wasicsko’s taxable income for 2010 is $340,000. Taxable income is expected in all future years.

(a) Prepare the journal entry for Wasicsko to record income taxes payable, deferred income taxes, and income tax expense for 2010, assuming that there were no deferred taxes at the end of 2009.

(b) Prepare the journal entry for Wasicsko to record income taxes payable, deferred income taxes, and income tax expense for 2010, assuming that there was a balance of $22,000 in a Deferred Tax Liability account at the end of 2009.

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