The following information is available for Swanson Corporation for 2008.
1. Depreciation reported on the tax return exceeded depreciation reported on the income statement by $100,000. This difference will reverse in equal amounts of $25,000 over the years 2009–2012.
2. Interest received on municipal bonds was $10,000.
3. Rent collected in advance on January 1, 2008, totaled $60,000 for a 3-year period. Of this amount, $40,000 was reported as unearned at December 31, for book purposes.
4. The tax rates are 40% for 2008 and 35% for 2009 and subsequent years.
5. Income taxes of $360,000 are due per the tax return for 2008.
6. No deferred taxes existed at the beginning of 2008.
Instructions
(a) Compute taxable income for 2008.
(b) Compute pretax financial income for 2008.
(c) Prepare the journal entries to record income tax expense, deferred income taxes, and income taxes payable for 2008 and 2009. Assume taxable income was $980,000 in 2009.
(d) Prepare the income tax expense section of the income statement for 2008, beginning with “Income before income taxes.”