Response to the following problem:
Warehouse System Inc. recognized service revenue of $960,000 on its financial statements in 2011. Assume, however, that the tax code requires this amount to be recognized for tax purposes in 2012. The taxable income for 2011 and 2012 is $7,100,000 and $8,900,000, respectively. Assume a tax rate of 40%.
Illustrate the effects on the accounts and financial statements of the tax expense, deferred taxes, and taxes payable for 2011 and 2012, respectively.