The following information is available for the first 4 years of operations for Shooting Star Corporation:

On January 2, 2018, the firm acquired heavy equipment costing $200,000 in a cash transaction. The equipment had a useful life of 5 years and no scrap value. The firm used the straight-line method of depreciation for book purposes; see the following for the tax depreciation taken each year:

On January 2, 2019, the firm collected $120,000 in advance for rental of a building for a 3-year period. The firm reported the entire $120,000 as taxable income in 2019, but $80,000 of the advance collection was unearned at December 31, 2019. The $80,000 was earned evenly over the next 2 years (i.e., 2020 and 2021).

Required

a. Determine the balance of the deferred tax accounts at the end of 2021.

b. Repeat requirement (a) assuming that a newly enacted tax law increased the corporate tax rate to 43%, effective the beginning of 2019.

c. Prepare the journal entries for 2018 and 2019 in requirement (b).

d. Prepare the journal entries for 2019 and 2020 in requirement (b) assuming that based on all available evidence. It is more likely than not that half of the deferred tax asset will not be realized. Reverse out the allowance for the realized portion of the deferred tax asset in 2020.

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Taxable Income (incoiporates all infonnation presented) Enacted Tax Rate (%} | Year 2018 S200.000 132 000 110 000 40% 2019 40 40 40 2020 2021 120.000 Tax Depreciation 2018 2019 2021 Total 2020 $90 000 S90 000 S66,000 $30.000 $14,000 $200.000