1. ABC Company at the end of 2016, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

Pretax financial income $ 520,000

Extra depreciation taken for tax purposes (1,200,000)

Estimated expenses deductible for taxes when paid 890,000

Taxable income $ 210,000

Use of the depreciable assets will result in taxable amounts of $400,000 in each of the next three years.

The estimated litigation expenses of $890,000 will be deductible in 2019 when settlement is expected.

a. Prepare a schedule of future taxable and deductible amounts.

b. Using the attached T-account template, prepare the journal entry to record income tax expense, deferred taxes, and income taxes payable for 2016, assuming a tax rate of 40% for all years.