Question: (Two Differences, No Beginning Deferred Taxes, Tracked through 2 Years) The following information is available for Wenger Corporation for 2013 (its first year of operations).
1. Excess of tax depreciation over book depreciation, $40,000. This $40,000 difference will reverse equally over the years 2014-2017.
2. Deferral, for book purposes, of $20,000 of rent received in advance. The rent will be recognized in 2014.
3. Pretax financial income, $300,000.
4. Tax rate for all years, 40%.
Instructions: (a) Compute taxable income for 2013.
(b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2013.
(c) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2014, assuming taxable income of $325,000.