Problem 1

A reconciliation of Sauder Companys pretax accounting income with its taxable income for 2014. Its first year of operations is as follows

Pretax accounting income is $8,000,000

Less: Excess tax depreciation of (240,000)

Less: Permanent diffrences (death benefit) of (260,000)

Equal: Taxable income of $7,500,000

The excess tax depreciationwill result in equal net taxable amounts in cash of the next three years. Pretax accounting income increase by 10% in each year after 2014. Enacted tax rates are 40% in 2014 then 35% in 2015 and 30% in 2016 and 2017.

Required

compute the total deferred tax liability (net of tax rate changes) to be reported on Sauders balance sheet at December 31, 2014.

Create the journal entries required at 12/31/14, and 12/31/15 and 12/31/16 and 12/31/17 to record tax expense and tax payable.