. (Two Differences, No Beginning Deferred Taxes, Tracked through 2 Years) The following information is available for Wenger Corporation for 2006.

1. Excess of tax depreciation over book depreciation, $40,000. This $40,000 difference will reverse equally over the years 2007-2010.

2. Deferral, for book purposes, of $20,000 of rent received in advance. The rent will be earned in 2007.

3. Pretax financial income, $300,000.

4. Tax rate for all years, 40%.

Instructions

(a) Compute taxable income for 2006.

(b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2006.

(c) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2007, assuming taxable income of $325,000.