Task: The following facts relate to McKane Corporation
1. Deferred tax liability, January 1, 2010, $60,000
2. Deferred tax asset January 1, 2010 $20,000
3. Taxable income for 2010, $115,000
4. Cumulative temporary difference at December 31, 2010 giving rise to future
5. Cumulative temporary difference at December 31, 2010 giving rise to $95,000
6. The tax rate for all years 40%. No permanent difference exists
7. The company is expected to operate profitably in the future
Instructions:
A) Compute the amount of pretax financial income for 2010
B) Prepare the journal entry record income tax expense, deferred income payable for 2010