Farmer Inc. began business on January 1, 2018. Its pretax financial income for the first 2 years was as follows: 2018 $360,000 2019 680,000 The following items caused the only differences between pretax financial income and taxable income. 1. In 2018, the company collected $396,000 of rent; of this amount, $132,000 was earned in 2018; the other $264,000 will be earned equally over the 20192020 period. The full $396,000 was included in taxable income in 2018. 2. The company pays $11,200 a year for life insurance on officers. 3. In 2019, the company terminated a top executive and agreed to $126,000 of severance pay. The amount will be paid $42,000 per year for 2019-2021. The 2019 payment was made. The $126,000 was expensed in 2019. For tax purposes, the severance pay is deductible as it is paid. The enacted tax rates existing at December 31, 2018 are: 2018 30% 2020 40% 2019 35% 2021 40% Determine taxable income for 2018 and 2019. 2018 2019 Taxable income $ $ Determine the deferred income taxes at the end of 2018. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Deferred income taxes $ Prepare the journal entry to record income taxes for 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Prepare a schedule of future taxable and (deductible) amounts at the end of 2019. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) 2020 2021 Total Future taxable (deductible) amounts: Rent $ $ $ Severance pay Prepare a schedule of the deferred tax (asset) and liability at the end of 2019. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Deferred Tax Temporary Difference Future Taxable (Deductible) Amounts Tax Rate (Asset) Liability Rent $ % $ $ Severance pay % Totals $ $ $ Compute the net deferred tax expense (benefit) for 2019. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net deferred tax expense (benefit) for 2019 $ Prepare the journal entry to record income taxes for 2019. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Show how the deferred income taxes should be reported on the balance sheet at December 31, 2019. Farmer Inc. Balance Sheet (Partial) $