ABC Corporation reported pretax accounting income of $200,000 and $250,000 for 2013 and 2014, respectively. The following information relates to the differences between pretax accounting income and taxable income.

a. ABC paid $10,000 for fines incurred for pollution violations in 2013.

b. ABC earned interest of $20,000 on tax-exempt municipal bonds in 2014.

c. ABC acquired an asset acquired at the beginning of 2012 at a cost of $450,000. The equipment has a useful life of five years and no salvage value. ABC uses straight-line depreciation for financial accounting. Depreciation for tax purpose is $150,000, $120,000, $90,000, $60,000, and $30,000 for 2012, 2013,2014, 2015 and 2016, respectively.

d. During 2012 accounting income included an estimated loss of $15,000 from having accured a loss contigency. The loss will be paid in 2014 at which time it is tax deductible.

e. In 2013, ABC collected $75,000 in advance rent revenue (taxable when collected). For financial reporting purposes, rent revenue will be recognized equally over the next three years (2014-2016).

Balances in deferred tax asset and deferred tax liability accounts at 1/1/2013 were $6,000 and $24,000, respectively. Enacted tax rate is 30% for 2013 and 40% for all future years.

Required

1. Calculate the taxable income and taxes payable for 2013 and 2014.

2. Determine the amounts necessary to record income taxes for 2013 and 2014, prepare the appropriate journal entries.