Gordon Company was started on January 1, 2010 and has two temporary differences between its income tax expense and income taxes payable. The information is shown below:

					2010		2011		2012
Pre-tax financial income					840,000		910,000		945,000
Excess of depreciation expense on tax return					(30,000)		(40,000)		(20,000)
Excess of warranty expense in financial income					20,000		10,000		8,000
Taxable income					830,000		880,000		933,000

The income tax rate is 40% for all years.

Instructions:

1. Prepare the journal entry to record income tax expense, deferred taxes and income tax payable for 2010, 2011, and 2012.

2. Indicate how deferred taxes will be reported on the 2012 balance sheet. Gordons product warranty is for 12 months.

3. Prepare the income tax expense section of the income statement for 2012, beginning with the line, Pretax financial income.