Comprehensive

At the beginning of 2013, Norris Company had a deferred tax liability of $7,500, 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 of financial income for 2013: income from continued operations, $136,500 (revenues of$311,000 and expenses of $174,500); gain on disposal of Division F, $24,900: extraordinary loss, $18,300: loss from operations of discontinued Division F, $8,100: and prior period adjustment, $13,200, 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 $5,000. Norris had a earnings balance of $142,000 on January 1, 2013, and declared and paid cash dividends of $44,000 during 2013.

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

If an amount box does not require, leave it blank.

Dec, 31 Income Tax Expense

Gain on Disposal of Division F

Retained earnings

Deferred Tax Liability

Extraordinary Loss

Loss from Operations of Discourse

Income Tax Payable

2. Prepare Norris's 2013 income statement.

Norris Company

Income Statement

For Year Ended December 31, 2013

Revenues

Expenses

Pretax income from continuing

Income tax expense

Income from continuing operations:

Results from discontinued operations:

Less: Loss from operations of discourse

Add: Gain on disposal discourse

Income before extraordinary

Less: Extraordinary loss (net o

Net income

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

Norris Company

Statement of Retained Earnings

For Year ended December 31, 2013

Retained earnings, January 1,2013

Add: Prior period adjustment

Adjustment retained earnings, January 1,2013

Add: Net income

Less: Cash dividends

Retained earnings, December 31, 2013

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

Norris Company

Partial Balance Sheet

December 31, 2013

Current Liabilities

Income taxes payable

Noncurrent Liabilities

Deferred income taxes