Storage Systems Inc. recognized service revenue of ($ 420,000) on its financial statements in 2007. Assume, however,

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Storage Systems Inc. recognized service revenue of $\$ 420,000$ on its financial statements in 2007. Assume, however, that the Tax Code requires this amount to be recognized for tax purposes in 2008. The taxable income for 2007 and 2008 is $\$ 2,600,000$ and $\$ 3,000,000$, respectively. Assume a tax rate of $40 \%$.

Prepare the journal entries to record the tax expense, deferred taxes, and taxes payable for 2007 and 2008, respectively.

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