Wee Corporation began operations in 2011. It reported book income or loss of $(4,000), $5,000, and $5,000 during 2011-2013 respectively.

During 2011-2013, the difference between taxable income and book income resulted from the following items:

(1)During 2011-2013, Wee accrued post-retirement healthcare costs (OPEB) of $2,000, $4,000, and $6,000 respectively. The OPEB costs are deductible for tax purposes when paid in 2018.

(2)During 2013, Wee reported $3,000 of tax-exempt interest on municipal securities.

Tax rates for 2011-2014 were as follows.

Year

Rate

2011

40%

2012

30%

2013

20%

2014

30%

Wee carries losses back whenever possible.

During 2014, the current year, Wee's income statement and tax returns were as follows:

Book

Tax

Sales Revenue

$30,000

$30,000

Installment Sales

24,000

----------

Interest Income

3,000

----------

57,000

30,000

Expenses

Wages

20,000

20,000

Depreciation

10,000

30,000

Bad debt

2,000

----------

32,000

50,000

Income (Loss) Before Tax

$25,000

$(20,000)

Other information:

1.Installment sales are taxed when collected, equally in 2016-2018.

2.Interest income is earned on tax-exempt securities.

3.Bad debts are deductible for taxes when the accounts are written off, equally in 2015 and 2016.

4.Depreciation expense will reverse equally in 2015 and 2016.

5.Wee determined that 60% of net operating loss carryforward would not be realized. Wee expects to earn no taxable income in 2015 and 2016.

6.On December 31, 2014, Congress enacted new tax rates, effective January 1, 2015. The new rates will be

YearRate

201520%

2016 and beyond40%

1.Prepare a schedule of Wee's temporary differences and carryforwards and related deferred tax assets and liabilities at December 31, 2013.

Temporary difference and CarryforwardsRateDTADTL

Taxable / (Deductible)

2.Prepare a schedule of Wee's temporary differences and carryforwards and related deferred tax assets and liabilities at December 31, 2014.

Temporary difference and CarryforwardsRateDTADTL

Taxable / (Deductible)

3.Prepare Wee's journal entries for 2014 taxes.