E19-3 (One Temporary Difference, Future Taxable Amounts, One Rate, Beginning Deferred Taxes)
Brennan Corporation began 2010 with a $90,000 balance in the Deferred Tax Liability account. At the end of 2010, the related cumulative temporary difference amounts to $350,000, and it will reverse evenly over the next 2 years. Pretax accounting income for 2010 is $525,000, the tax rate for all years is 40%, and taxable income for 2010 is $400,000.
(a) Compute income taxes payable for 2010.
(b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2010.
(c) Prepare the income tax expense section of the income statement for 2010 beginning with the line “Income before income taxes.”