Question - Dallas Company had financial and taxable incomes as follows:
2010 Pretax financial income of $150,000 and 2010 Taxable income of 115,000.
2011 Pretax financial income of $140,000 and 2011 Taxable income of 140,000.
2012 Pretax financial income of $135,000 and 2012 Taxable income of 170,000.
The tax rate for all three years was 20%.
REQUIRED:
a. Prepare the journal entries to record income taxes for all three years.
b. Explain why the taxes paid in 2012 are different from the tax return and the amount reported in the financial statements.