two differences no beginning deferred taxes tracked through 251501

(Two Differences, No Beginning Deferred Taxes, Tracked through 2 Years) The following information is available for McKee Corporation for 2010.

1. Excess of tax depreciation over book depreciation, $40,000. This $40,000 difference will reverse equally over the years 2011–2014.

2. Deferral, for book purposes, of $25,000 of rent received in advance. The rent will be earned in 2011.

3. Pretax financial income, $350,000.

4. Tax rate for all years, 40%.

(a) Compute taxable income for 2010.

(b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2010.

(c) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2011, assuming taxable income of $325,000.

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