Life Cycle of a Temporary Difference
A. J. Johnson & Co. recorded certain revenues on its books in 2008 and 2009 of $15,400 and $16,600, respectively. However, such revenues were not subject to income taxation until 2010. The company records reveal pretax financial income and taxable income for the 3 year period as follows:
Financial Income |
Taxable Income |
|
2008 |
$44,200 |
$28,800 |
2009 |
38,200 |
21,600 |
2010 |
21,100 |
53,100 |
Assume that Johnson’s tax rate is 40% for all periods.
Instructions: Prepare the journal entries necessary at the end of each year to record income taxes.