Madison Services computed pretax financial income of $220,000 for 2017 and $288,000 for 2018. In preparing the income tax return for the year, the tax accountant determined the following differences between financial income and taxable income for 2017 and 2018:

		2017	2018
(1)	Nondeductible expenses	$40,000	30,000
(2)	Nontaxable revenues	14,000	22,000
(3)	Unearned rent of next two years received	20,000
(4)	Installment sales in financial income but not in taxable income	70,000

The temporary Installment sales difference is expected to reverse in the following pattern:

2018	$14,000
2019	32,000
2020	24,000
	$70,000

(5) Madison purchase a new machine in 2018 for $150,000 and depreciates $50,000 a year from 2018 to 2020. For tax reporting, the depreciation expense is as follows:

2018	$100,000
2019	35,000
2020	15,000
	$150,000

The enacted tax rates for this year and the next three years are as follows:

2017	40%
2018	35%
2019	32%
2020	30%

Instructions

(1) Prepare a schedule showing the reversal of the temporary differences and the computation of income taxes payable and deferred tax assets or liabilities as of December 31, 2017.

(2) Prepare journal entries to record income taxes payable and deferred income taxes for 2017.

(3) Prepare the income statement for Madison Services beginning with "Income from continuing operations before income taxes" for the year ended December 31, 2017.

(4) Prepare journal entries to record income taxes payable and deferred income taxes for 2018.

(5) Prepare the income statement for Madison Services beginning with "Income from continuing operations before income taxes" for the year ended December 31, 2018.