Kimm-Mills Incorporated (KMI) acquired a piece of equipment at a total cost of $ 5,400,000. KMI uses the straight- line method of depreciation for financial reporting purposes and an accelerated method for tax purposes. The asset has a six- year life for book purposes and for tax purposes. There is no estimated scrap value. KMI is subject to a 40% tax rate. We present the income and depreciation summary for both tax and GAAP below.

Required
a. Determine the balance of the deferred tax account at the end of each year.
b. Prepare the journal entries to record the tax provision for each year.
c. Prepare the journal entry to record the effect of a 35% income tax rate that is enacted into law effective as of the beginning of year 4.

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Income before Tax Tax GAAP Year and Depreciat Depreciation Depreciation $900,000 900,000 900,000 900,000 900,000 900,000 $5,400,000 S5,400,000 $1.200,000 1,880,000 1,980,000 2,100,000 1,750,000 1,200,500 $1,080,000 1,728,000 1,036,900 622,080 622,080 311,040 5 Totals