International Roofing Systems (IRS) Company began operations several years ago At the end of 2017, the only existing temporary differences were the difference described in (e) and (f) below (hint this creates balances at the end of 2017 in the deferred tax balance sheet accounts) In addition, there are four other tax differences arising in 2018 and 2019 These differences are as follows Interest revenue earned on an investment in tax exempt municipal bonds is $34,000 each year In 2018, pretax financial income includes payments of fines for polluting of $100,000 IRS began franchising its business at the beginning of 2018 and collected $30,000 of franchise fees for services to be rendered in the initial year and over the next several years Franchise fees are reported when collected for tax purposes For financial reporting purposes, franchise fees are recognized as revenue when services related to the franchise agreement are provided these amounts are $20,000 in 2018 and $4,000 in 2019 At July 1 , 2018, IRS purchased a subsidiary that resulted in an amount of $600,000 being assigned to goodwill For tax purposes, the goodwill is amortized and deducted over a 15 year period on a straight line basis For financial reporting purposes, goodwill is not amortized, but is required to be tested for impairment at the end of 2018, IRS determined that goodwill is not impaired, but at the end of 2019, IRS determined that the goodwill has an impairment loss of $45,000 Several years ago, IRS purchased equipment at a cost of $200,000 For financial accounting purposes, straight line depreciation over the estimated useful life of 10 years is used For tax purposes, the MACRS system is used and the equipment falls in the 7 year recovery class As of the end of 2017, the accounting basis for the carrying value was $120,000 and the tax basis was $62,480 For 2018 and 2019, the MACRS rates for depreciation are 8 93 and 8 92 , respectively IRS has a defined benefit pension plan for its employees For financial reporting purposes, the accrual basis is used and for tax purposes, pension costs are deducted as funding contributions to the plan are paid As of the end of 2017, pension expense for financial reporting has been $200,000 greater than funding contributions Pension expense for financial reporting purposes is $42,000 in 2018 and $50,000 in 2019, and the amount deducted for tax purposes is $2,000 in 2018 and $5,000 in 2019 Additional information Pretax financial income $180,000 for 2018 and $210,000 for 2019 The enacted tax rate, effective in 2018, is 25 As of the end of each year, management estimates that it is more likely than not that future deductible amounts will not be realized as follows 2017 $10,000 2018 $12,000 2019 $15,000 REQUIRED Prepare schedules to compute the December 31, 2018 and 2019 balances of the deferred tax asset and liability accounts also compute the required balance at the end of each year for the valuation allowance Prepare journal entries to record the deferred portion of income tax expense for 2018 and 2019 Prepare the appropriate balance sheet presentation of the deferred tax accounts at December 31, 2019, assuming all deferred tax accounts are within one tax jurisdiction

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International Roofing Systems (IRS) Company began operations several years ago. At the end of 2017, the only existing temporary differences were the difference described in

International Roofing Systems (IRS) Company began operations several years ago. At the end of 2017, the only existing temporary differences were the difference described in (e) and (f) below (hint: this creates balances at the end of 2017 in the deferred tax balance sheet accounts). In addition, there are four other tax differences arising in 2018 and 2019. These differences are as follows:

Interest revenue earned on an investment in tax-exempt municipal bonds is $34,000 each year.

In 2018, pretax financial income includes payments of fines for polluting of $100,000.

IRS began franchising its business at the beginning of 2018 and collected $30,000 of franchise fees for services to be rendered in the initial year and over the next several years. Franchise fees are reported when collected for tax purposes. For financial reporting purposes, franchise fees are recognized as revenue when services related to the franchise agreement are provided; these amounts are $20,000 in 2018 and $4,000 in 2019.
At July 1, 2018, IRS purchased a subsidiary that resulted in an amount of $600,000 being assigned to goodwill. For tax purposes, the goodwill is amortized and deducted over a 15-year period on a straight-line basis. For financial reporting purposes, goodwill is not amortized, but is required to be tested for impairment; at the end of 2018, IRS determined that goodwill is not impaired, but at the end of 2019, IRS determined that the goodwill has an impairment loss of $45,000.
Several years ago, IRS purchased equipment at a cost of $200,000. For financial accounting purposes, straight-line depreciation over the estimated useful life of 10 years is used. For tax purposes, the MACRS system is used and the equipment falls in the 7-year recovery class. As of the end of 2017, the accounting basis for the carrying value was $120,000 and the tax basis was $62,480. For 2018 and 2019, the MACRS rates for depreciation are 8.93% and 8.92%, respectively.

IRS has a defined benefit pension plan for its employees. For financial reporting purposes, the accrual basis is used and for tax purposes, pension costs are deducted as funding contributions to the plan are paid. As of the end of 2017, pension expense for financial reporting has been $200,000 greater than funding contributions. Pension expense for financial reporting purposes is $42,000 in 2018 and $50,000 in 2019, and the amount deducted for tax purposes is $2,000 in 2018 and $5,000 in 2019.

Additional information:

Pretax financial income $180,000 for 2018 and $210,000 for 2019.
The enacted tax rate, effective in 2018, is 25%.
As of the end of each year, management estimates that it is more likely than not that future deductible amounts will not be realized as follows: 2017: $10,000; 2018: $12,000; 2019: $15,000

REQUIRED:

Prepare schedules to compute the December 31, 2018 and 2019 balances of the deferred tax asset and liability accounts; also compute the required balance at the end of each year for the valuation allowance.
Prepare journal entries to record the deferred portion of income tax expense for 2018 and 2019.
Prepare the appropriate balance sheet presentation of the deferred tax accounts at December 31, 2019, assuming all deferred tax accounts are within one tax jurisdiction.