Problem 2. The following differences between financial and taxable income were reported by Dider Corporation for the year:

(a) Excess of tax depreciation over book depreciation $10,000

(b) Interest revenue on municipal bonds 9,000

(c)Excess of estimated warranty expense over actual expenditures 54,000

(d) Rent of next year paid 12,000

(e) Fines paid 30,000

(f)Excess of income reported under percentage-of-completion

accounting for financial reporting over completed-contract

accounting used for tax reporting $45,000

(g) Interest on indebtedness incurred to purchase tax-exempt securities 3,000

(h) Unrealized losses on marketable securities recognized for

financial reporting 18,000

Instructions

(1) Assume that Dider Corporation had pretax accounting income [before considering items (a) through (h)] of $900,000 for the current year. Compute the taxable income for the current year.

(2) Make entries to record income tax expense for the year assuming that the tax rate is 35% this year and 20% starting next year.

(3) Prepare the income tax expense section of the income statement, beginning with "Income before income taxes."

(4) Indicate how deferred income taxes should be presented on the balance sheet.