Answer Happy

The following information is available for Direct Media Inc. for
2012.
1. Excess of tax depreciation over book depreciation, $80,000.
This $80,000 difference will reverse equally over the next 4
years.
2. Deferral, for book purposes, of $25,000 of subscription
income received in advance. The subscription income will be earned
in 2013.
3. Pretax financial income, $160,000.
4. Tax rate for all years, 35%.
Instructions
(a) Compute taxable income for 2012 (Check your answer:
$105,000).
(b) Prepare the journal entry to record income tax
expense, deferred income taxes, and income taxes payable for 2012
(Hints: you should record both deferred tax assets and deferred tax
liabilities).
(c) Prepare the journal entry to record income tax
expense, deferred income taxes, and income taxes payable for 2013,
assuming taxable income of $255,000.