At December 31, 2009, the records of Pearson Corporation provided the following information:
Income statement
Revenues ……………………………………….. $140,000
Depreciation expense (straight line) …………… (11,000)†
Remaining expenses (excluding income tax) …… (90,000)
Pretax income …………………………………… $ 39,000
†Equipment depreciated—acquired January 1, 2009, cost $44,000; estimated useful life, four years and no residual value. Accelerated depreciation is used on the tax return as follows: 2009, $17,600; 2010, $13,200; 2011, $8,800; and 2012, $4,400.
a. Income tax rate, 30 percent. Assume that 85 percent is paid in the year incurred.
b. Taxable income from the 2009 income tax return, $32,400.
Required:
1. Compute income taxes payable and deferred income tax for 2009. Is the deferred income tax a liability or an asset? Explain.
2. Show what amounts related to 2009 income taxes should be reported on the income statement and balance sheet.