Deferred Tax Asset
Pro Tech Tronics Company computed pretax financial income of $35,000 for the first year of its operations ended December 31, 2008. Unearned rent revenue of $55,000 had been recognized as taxable income in 2008 when the cash was received but had not yet been recognized in the financial accounting records. The unearned rent is expected to be recognized on the books in the following pattern.
|
2009 |
$15,000 |
|
2010 |
20,000 |
|
2011 |
12,000 |
|
2012 |
8,000 |
|
Total |
$55,000 |
The enacted tax rates for this year and the next four years are as follows:
|
2008 |
34% |
|
2009 |
34 |
|
2010 |
30 |
|
2011 |
30 |
|
2012 |
37 |
Prepare the journal entries necessary to record income taxes for 2008. Assume that there will be sufficient income in each future year to realize any deductible amounts.