The comparative income statement for Chung Corporation at the end of December 3 1 , 2004, provided the following summarized pretax data:

Included in the 2004 data is a S5.000 revenue that was taxable only in the 2003 income tax return. The average income tax rate was 32 percent. Taxable income shown in the tax returns was 2003. SI 3.000.
and 2004, $18,500.
Required: 1. For each year, compute

(a) income taxes payable and

(b) deferred income tax. Is the deferred income tax a liability or an asset? Explain. 2. Give the journal entry for each year to record income taxes payable, deferred income tax. and income tax expense. 3. Show what amounts related to income taxes should be reported each year on the income statement and balance sheet. Assume that income tax is paid on April 15 of the next year. 4. Why would management want to incur the cost of maintaining separate tax and financial accounting records to defer the payment of taxes?

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Revenue Expenses (excluding income tax) Pretax income Year 2003 Year 2004 $80,000 $88.000 65,000 69,000 $15,000 $19,000