At the beginning or 2013, Norris Company has a deferred tax liability of $6000, 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 2012 and 2013, but in 2012 Congress enacted a 40% tax rate for 2014 and future years.

Norris's accounting records show the following pretax items fo financial income for 2013: income from continuing operations, $150,000 (revenues of $368,000 and expenses of $218,000); gain on disposal of Division F, $26,600; extraordinary loss, $15,000; loss from operations of discontinued Division F, $10,300; and prior period adjustment, $16,800, due to an error that understated revenue in 2012. All of these items are taxable; however, financial depreciation for 2013 on assets related to continuing operations exceeds tax depreciation by $5300. Norris had a retained earnings balance of $166,000 on January 1, 2013, and declared and paid cash dividends of $33,000 during 2013.

1. Prepare Norris's income tax journal entry at the end of 2013.

DEC 31 Income Tax Payable

Gain or Disposal on Division F

Retained Earnings

Deferred Tax Liabilities

Extraordinary Loss

Loss from operations of discontinued Division F

Income Taxes payable

2. Prepare Norris's 2013 Income Statement

Revenues 368,000

Expenses 218,000

Pretax income from continuing operations

Income Tax Expense

Income from continuing operations

Results from discontinued operations:

Less: Loss from operation of discontinued Division F (net of income tax credit)

Add: Gain on disposal of discontinued Division F (net of income taxes)

Income before extraordinary loss

Less: extraordinary loss (net of income tax credit)

Net Income

3. Prepare Norris's 2013 statement of retained earnings.

Retained earnings, January 1, 2013 $166,000

Add: Prior period adjustment (Net of taxes)

Adjusted retained earnings, January 1, 2013

Add: Net Income

Less: Cash Dividends 33,000

Retained Earnings, December 31, 2013

4. Show the related income tax disclosures on Norris's December 31, 2013 balance sheet.

Current Liabilities

Income Taxes Payable

Noncurrent Liabilities

Deferred Income Taxes