The pretax financial income of Truttman Company differs from its taxable income throughout each of 4 years as follows.

 

Pretax financial income for each year includes a nondeductible expense of $30,000 (never deductible for tax purposes). The remainder of the difference between pretax financial income and taxable income in each period is due to one depreciation temporary difference. No deferred income taxes existed at the beginning of 2014. 

Instructions 

(a) Prepare journal entries to record income taxes in all 4 years. Assume that the change in the tax rate to 40% was not enacted until the beginning of 2015. 

(b) Prepare the income statement for 2015, beginning with Income before income taxes.

Year Pre-tax Taxable Tax Rate 2014 $290.000 S180,000 35% 320.000 2015 225.000 40% 2016 350,000 260.000 40% 2017 420,000 560,000 40%