At the beginning of 2016, Norris Company had a deferred tax liability of $6,600, because of the use of MACRS depreciation for income tax purposes and units-of-production depreciation for financial reporting. The income tax rate is 30% for 2015 and 2016, but in 2015 Congress enacted a 39% tax rate for 2017 and future years.

Norris's accounting records show the following pretax items of financial income for 2016: income from continuing operations, $120,000 (revenues of $353,200 and expenses of $233,200); gain on disposal of Division F, $21,100; loss from operations of discontinued Division F, $10,800; and prior period adjustment, $16,900, due to an error that understated revenue in 2015. All of these items are taxable; however, financial depreciation for 2016 on assets related to continuing operations exceeds tax depreciation by $4,400. Norris had a retained earnings balance of $159,100 on January 1, 2016, and declared and paid cash dividends of $32,400 during 2016.

Required:

1. Prepare Norris's income tax journal entry at the end of 2016.

2. Prepare Norris's 2016 income statement.

3. Prepare Norris's 2016 statement of retained earnings.

4. Show the related income tax disclosures on Norris's December 31, 2016, balance sheet.

CHART OF ACCOUNTS

Norris Company

General Ledger

ASSETS

111 Cash

121 Accounts Receivable

141 Inventory

152 Prepaid Insurance

181 Equipment

198 Accumulated Depreciation

LIABILITIES

211 Accounts Payable

231 Salaries Payable

250 Unearned Revenue

260 Deferred Tax Liability

261 Income Taxes Payable

EQUITY

311 Common Stock

331 Retained Earnings

REVENUE

411 Sales Revenue

882 Gain on Disposal of Discontinued Division

EXPENSES

500 Cost of Goods Sold

511 Insurance Expense

512 Utilities Expense

521 Salaries Expense

532 Bad Debt Expense

540 Interest Expense

541 Depreciation Expense

559 Miscellaneous Expenses

892 Loss from Operations of Discontinued Division

910 Income Tax Expense

Labels

Current Assets

Current Liabilities

Noncurrent Liabilities

Noncurrent Assets

Results from discontinued operations

Amount Descriptions

Adjusted retained earnings, January 1, 2016

Cash dividends

Deferred income taxes

Expenses

Income from continuing operations

Net income

Prior period adjustment

Pretax income from continuing operations

Retained earnings, December 31, 2016

Revenues

Retained earnings, January 1, 2016