Sandtrap Company recorded certain revenues of $12,000 and $16,000 on its books in 2010 and 2011, respectively. However, these revenues were not subject to income taxation until 2012. Company records reveal pretax financial accounting income and taxable income for the three-year period as follows:

Assume Sandtrap's tax rate is 35% for all periods.
Required:
1. Determine the amount of income tax that will be paid each year from 2010 through 2012.
2. Determine the amount of income tax expense that will be reported on the income statement each year from 2010 through 2012.
3. Compute the amount of deferred tax liability that would be reported on the balance sheet at the end of each year.
4. Interpretive Question: Why would the IRS allow Sandtrap to defer payment of taxes on some of the revenue earned in 2010 and2011?

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Financial Income Taxable Income 2010 2011 2012 $58,000 51,000 40,000 $46,000 35,000 68,000