(One Difference, Multiple Rates, Effect of Beginning Balance versus No Beginning Deferred Taxes) At the end of 2006, Lucretia McEvil Company has $180,000 of cumulative temporary differences that will result in reporting future taxable amounts as follows.

Tax rates enacted as of the beginning of 2005 are:

McEvil’s taxable income for 2006 is $320,000. Taxable income is expected in all future years.
Instructions

(a) Prepare the journal entry for McEvil to record income taxes payable, deferred income taxes, and income tax expense for 2006, assuming that there were no deferred taxes at the end of 2005.

(b) Prepare the journal entry for McEvil to record income taxes payable, deferred income taxes, and income tax expense for 2006, assuming that there was a balance of $22,000 in a Deferred Tax Liability account at the end of 2005.

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2007 $ 60,000 2008 50,000 2009 40,000 2010 30,000 $180,000