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Problem 1 (30 points) Lane's first year of operations was 2013. In 2013 Lane had the following temporary differences: Excess tax depreciation Sales on
Problem 1 (30 points) Lane's first year of operations was 2013. In 2013 Lane had the following temporary differences: Excess tax depreciation Sales on account in excess of cash collections 75,000 45,000 The following information relates to the year ended December 31, 2014: Pretax accounting income $500,000 Excess tax depreciation 60,000 20,000 15,000 Cash collections in excess of sales on account Accrued salaries in excess of salaries paid The enacted income tax rate is 30% for all years. 1. Temporary differences related to depreciation will reverse out by $40,000 in 2015 and $95,000 in 2016. 2. Temporary differences related to A/R are expected to reverse out the following year. 3. Temporary differences related to accrued salaries are expected to reverse out the following year. Instructions a. Prepare the journal entry to record income tax expense, deferred taxes, and the income taxes payable for 2014. b. At the end of 2014, what is the cumulative temporary difference related to deferred tax liabilities? c. At the end of 2014, what is the balance of any deferred tax liabilities? d. At the end of 2014, what is the cumulative temporary difference related to deferred tax assets? e. At the end of 2014, what is the balance of any deferred tax assets?
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