Recording and Reporting Multiple Temporary Differences

Cross Corporation provided the following reconciliation between taxable income and pretax GAAP income. Depreciation adjustment results from a difference between the GAAP basis and tax basis of depreciable equipment. Bad debt expense adjustment results from a difference between the GAAP basis and tax basis of net accounts receivable. Deferred tax accounts have a zero balance at the start of Year 1. Tax rate is 25%.

Please answer the following and show your work:

a. Record the income tax journal entry on December 31 of Year 1. b. Record the income tax journal entry on December 31 of Year 2. c. Record the income tax journal entry on December 31 of Year 3. d. Record the income tax journal entry on December 31 of Year 4. Note: If a line in a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero).

\begin{tabular}{|l|r|r|r|r|} \hline & Year 1 & Year 2 & Year 3 & Year 4 \\ \hline Taxable income & $59,500 & $79,500 & $84,400 & $74,600 \\ \hline Interest revenue on tax-exempt municipal bonds & 500 & 500 & 600 & 400 \\ \hline Depreciation expense & 15,000 & (5,000) & (5,000) & (5,000) \\ \hline Bad debt expense & (20,000) & (10,000) & (18,000) & 25,000 \\ \hline Pretax GAAP income & $55,000 & $65,000 & $62,000 & $95,000 \\ \hline \hline \end{tabular}