Aldridge Inc. engaged in the following transactions during Year 1.

- Straight-line deprectation of $35,000 on its financial statements and accelerated depreciation of $52,000 on its tax books.

- A payout of $200,000 was received from a life insurance policy on its cheif operating officer, with Aldridge as the sole benficiary.

- Royalities of $50,000 were paid to Aldridge in advance, based on anticipated sales for next year.

- Aldridge booked bad debt expense of $25,000 associated with its receivables.

The company follows U.S. GAAP and has a tax rate in Year 1 of 30%. In Year 2, the company learns that its tax rate will be changing to 35% going forward. Income tax payable is $35,500 for Year 1 and $28,900 for Year 2.

Question 1. For each of the items listed above, please complete the table below:

Item Temp or Perm Diff Deferred Tax Asset(DTA) or

Deferred Tax Liability or Neither

1. Straight-line depreciation of $35,000 on its financial statements and accelerated depreciation of $52,000 on its tax books.

2. A payout if $200,000 was received from a life ins. policy on its cheif operating officer, with Aldridge as the sole beneficiary.

3. The company paid a fine of $1,000 for failing to file some paperwork with the IRS during the fiscal year.

4. Royalties of $50,000 were paid to Aldridge in advance, based on anticipated sales for Year 3.

5. Aldridge booked bad debt expense of $25,000 associated with its receivables.

Question 2

What is the journal entry associated with the transactions about for Year 1? (what are the amounts)

Income Tax Expense

Change in DTA

Change in DTL

Income Tax Payable

Question 3

What is the journal entry associated with the transactions above for Year 2? (what are the amounts)

Income Tax Expense

Change in DTA

Change in DTL

Income Tax Payable