One Temporary Difference, Future Taxable Amounts, One Rate, Beginning Deferred Taxes Band
One Temporary Difference, Future Taxable Amounts, One Rate, Beginning Deferred Taxes
Bandung Corporation began 2007 with a $92,000 balance in the Deferred Tax Liability account. At the end
of 2007, the related cumulative temporary difference amounts to $350,000, and it will reverse evenly over
the next 2 years. Pretax accounting income for 2007 is $525,000, the tax rate for all years is 40%, and taxable
income for 2007 is $405,000.
(a) Compute income taxes payable for 2007.
(b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes
payable for 2007.
(c) Prepare the income tax expense section of the income statement for 2007 beginning with the line
“Income before income taxes.”