1. (Two Temporary Differences, One Rate, 3 Years) Gordon Company has two temporary differences between its income tax expense and income taxes payable. The information is shown below. The income tax rate for all years is 40%.
(a) Prepare the journal entry to record income tax expense, deferred income taxes, and income tax payable for 2010, 2011, and 2012.
(b) Assuming there were no temporary differences prior to 2010, indicate how deferred taxes will be reported on the 2012 balance sheet. Gordon's product warranty is for 12 months.
(c) Prepare the income tax expense section of the income statement for 2012, beginning with the line "Pretax financial income.
