The accounting income of Stephani Corporation and its taxable income for the years 2014 to 2017 are as follows:

YearAccounting IncomeTaxable IncomeTax Rate

2014.........$460,000............$299,000................25%

2015...........420,000..............294,000................30%

2016...........390,000..............304,200................30%

2017...........460,000..............644,000................30%

The change in the tax rate from 25% to 30% was not enacted until early in 2015.

Accounting income for each year includes an expense of $40,000 that will never be deductible for tax purposes. The remainder of the difference between accounting income and taxable income in each period is due to one reversing difference for the depreciation of property, plant, and equipment. No deferred taxes existed at the beginning of 2014.

Instructions

(a) Calculate the current and deferred tax expense or benefit for each of the four years. Also calculate the balance of the deferred tax balance sheet account at the end of each fiscal year from 2014 to 2017.

(b) Prepare journal entries to record income taxes in all four years.

(c) Prepare the bottom of the income statement for 2015, beginning with the line "Income before income tax."