Computation of Deferred Asset and Liability Balances
Dixon Type and Supply Company reported taxable income of $75,000 for 2008, its first fiscal year. The enacted tax rate for 2008 is 40%. Enacted tax rates and deductible amounts for 2009–2012 are as follows:
|
|
Enacted Tax Rate |
Deductible Amount |
|
2009 |
35% |
$14,000 |
|
2010 |
32 |
24,000 |
|
2011 |
30 |
16,000 |
|
2012 |
32 |
40,000 |
1. 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. For classification purposes, assume that all deductible amounts relate to noncurrent items.
2. Repeat (1), assuming it is more likely than not that taxable income for all future periods will be zero or less.