Pito Company has been in operation for several years. During those years, the company has been profitable and it expects to continue to be profitable in the foreseeable future. At the beginning of 2016, Pito has a deferred tax asset of $360 pertaining to one future deductible amount. During 2016, Pito earned taxable income of $51,000 which was taxed at a rate of 30% (no change in the tax rate has been enacted for future years). At the end of 2016, the book value of the current liability to which the deferred tax asset relates for financial reporting purposes exceeded the book value for income tax purposes by $6,000.

Required:

1. Prepare Pito's income tax journal entry at the end of 2016.

2. Show how the deferred tax asset is reported on Pito's December 31, 2016, balance sheet.

CHART OF ACCOUNTS

Pito Company

General Ledger

ASSETS

111 Cash

121 Accounts Receivable

141 Inventory

152 Prepaid Insurance

160 Deferred Tax Asset

181 Equipment

198 Accumulated Depreciation

LIABILITIES

211 Accounts Payable

231 Salaries Payable

250 Unearned Revenue

260 Deferred Tax Liability

261 Income Taxes Payable

EQUITY

311 Common Stock

331 Retained Earnings

REVENUE

411 Sales Revenue

EXPENSES

500 Cost of Goods Sold

511 Insurance Expense

512 Utilities Expense

521 Salaries Expense

532 Bad Debt Expense

540 Interest Expense

541 Depreciation Expense

559 Miscellaneous Expenses

910 Income Tax Expense