(Two Temporary Differences, Tracked through 3 Years, Multiple Rates) Taxable income and pretax financial income would be identical for Huber Co. except for its treatments of gross profit on installment sales and estimated costs of warranties. The following income computations have been prepared.

The tax rates in effect are: 2006, 40%; 2007 and 2008, 45%. All tax rates were enacted into law on January 1, 2006. No deferred income taxes existed at the beginning of 2006. Taxable income is expected in all future years.
Instructions Prepare the journal entry to record income tax expense, deferred income taxes, and income tax payable for 2006, 2007, and 2008.

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Taxable income 2006 2007 2008 Excess of revenues over expenses (excluding two temporary differences) $160,000 $210,000 $90,000 Installment gross profit collected 8,000 8,000 8,000 Expenditures for warranties Taxable income (5,000) (5,000) (5,000) $163,000 $213,000 $93,000 2006 2007 2008 Pretax financial income Excess of revenues over expenses (excluding two temporary differences) $160,000 $210,000 $90,000 Installment gross profit earned. 24,000 -0- Estimated cost of warranties (15,000) -0- -0- ---0- Income before taxes $169,000 $210,000 $90,000