1. Two independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced by temporary differences:

SITUATION 1 2

Taxable income $120,000 $30,000

Amounts at year-end:

Future deductible amounts 18,000 12,000

Future taxable amounts 0 8,000

Balances at beginning of year,

Deferred tax asset $2,000 $4,000

Deferred tax liability 0 1,000

The enacted tax rate is 25% for both situations.

Required:

A. For each situation determine the:

(a.) Income tax payable currently.

(b.) Deferred tax asset - balance at year-end.

(c.) Deferred tax asset change for the year.

(d.) Deferred tax liability - balance at year-end.

(e.) Deferred tax liability change for the year.

(f.) Income tax expense for the year.

B. PREPARE THE APPROPRIATE JOURNAL ENTRIES.