The comparative income statements of Martin Corporation for fiscal years 2011 and 2012 showed the following summarized pretax data:

The expenses in 2011 included an amount of \(\$ 4,000\) that was deductible for tax purposes in 2012. The average income tax rate was 32 percent. Taxable income from the income tax returns was \(\$ 20,000\) for 2011 and \(\$ 16,000\) for 2012.
Required:
1. For each year, compute

(a) the income taxes payable and

(b) the deferred income tax. Is the deferred income tax a liability or an asset? Explain.
2. Show what amounts related to income taxes should be reported each year on the income statement and the statement of financial position. Assume that the income tax is paid on March 1 of the next year.
3. Explain why tax expense is not simply the amount of cash paid during the year.

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Year 2011 Sales revenue $55,000 Year 2012 $63,000 Expenses (excluding income tax) 39,000 43,000 Pretax income $16,000 $20,000