2023 wasthe first year of operationsfor Lincoln Corporation. In 2023, Lincoln reported pretax accounting income

of $1,000,000, which included the following amounts:

1. Interest received on tax-exempt bonds $30,000 was reported on the 2023 income statement.

However, this revenue is not included in taxable income.

2. Insurance expense of $4,000, representing one-fourth of a $16,000, four-year casualty and liability

insurance policy that is deducted for tax purposesin its entirety in 2023.

3. A piece of equipment costing $600,000 with a four-year useful life was acquired at the beginning of

2023. It is depreciated by the straight-line method for accounting purposes. However, MACRS is used on

the tax return. The depreciation reported on the income statement and the tax return forthe four-

year period isshown below:

Depreciation

Year Income Statement Tax Return Difference

2023 $150,000 $198,000 $(48,000)

2024 150,000 264,000 (114,000)

2025 150,000 90,000 60,000

2026 150,000 48,000 102,000

$600,000 $600,000 $-0-

4. In 2023, estimated warranty expense of $9,000 will be deductible on the tax return when actually

paid during 2024, 2025, and 2026. Estimated deductions are asfollows:

Warranty

Year Income Statement Tax Return Difference

2023 $9,000 $-0- $9,000

2024 -0- 6,000 (6,000)

2025 -0- 2,000 (2,000)

2026 -0- 1,000 (1,000)

$9,000 $9,000 $-0-

5. In 2023, property was sold on an installment basis for $60,000. Lincoln recognizes installment income

for financial reporting purposes in the year of sale. For tax purposes, installment income is reported

by the installment method when the cash is received. The scheduled collections are as follows: $25,000

in 2024, and $35,000 in 2025.

The enacted tax rate for 2023 was 30%. Because of changes in the tax legislation, the enacted tax rates

for 2024, 2025 and 2026 are as follows:

2024 25%

2025 25%

2026 25%

3. Prepare the appropriate journal entry for 2023 for tax expense, deferred tax assets, deferred tax

liabilities and taxes payable. Show computations.