At the end of 2007, its first year of operations, the Slater Company reported a book value for its depreciable assets of $40,000 for financial reporting purposes and $33,000 for income tax purposes. The company earned taxable income of $97,000 during 2007. The company is subject to a 30% income tax rate and no change has been enacted for future years. The depreciation was the only temporary difference between taxable income and pretax financial income.
Required
1. Prepare the income tax journal entry of the Slater Company at the end of 2007.
2. Show how the deferred taxes would be reported on the Slater Company’s December 31, 2007 balance sheet.