Dixon Type and Supply Company reported taxable income of $75,000 for 2013, its first fiscal year. The enacted tax rate for 2013 is 40%. Enacted tax rates and deductible amounts for 2014 2017 are as follows:
__________________________Enacted Tax Rate ___________Deductible Amount
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . 35% ................................... $14,000
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 .................................... 24,000
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 .................................... 16,000
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 .................................... 40,000
1. Prepare the journal entries necessary to record income taxes for 2013. 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.