Swingley Company uses an accelerated method to depreciate its fixed assets for tax purposes and the straight-line method for financial reporting purposes. In 1996 the accelerated method recognized depreciation of $35,000, while the straight-line method recognized depreciation of $20,000. Taxable income and net income before taxes for that year were $65,000 and $80,000, respectively. REQUIRED:

a. If the federal income tax rate is 35 percent, prepare the journal entry recorded by Swingley to accrue its 1996 tax liability.

b. If the federal income tax rate is 30 percent, prepare the journal entry recorded by Swingley to accrue its 1996 tax liability.

c. Briefly explain why the Deferred Income Tax account is considered a liability on the bal¬ ance sheet and why it is less when the tax rate is 35 percent than when the rate is 40 per¬ cent