The pretax financial income of Truttman AG differs from its taxable income throughout each of 4 years as follows.

Pretax financial income for each year includes a non-deductible expense of €30,000 (never deductible for tax purposes). The remainder of the difference between pretax financial income and taxable income in each period is due to one depreciation temporary difference. No deferred income taxes existed at the beginning of 2022.

Instructions

a. Prepare journal entries to record income taxes in all 4 years. Assume that the change in the tax rate to 40% was not enacted until the beginning of 2023.

b. Prepare the income statement for 2023, beginning with income before income taxes.

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Pretax Taxable Year Financial Income Income Tax Rate 2022 €290,000 €180,000 35% 2023 320,000 225,000 40% 2024 350,000 260,000 40% 2025 420,000 560,000 40%