E19-18B (Three Differences, Multiple Rates, Future Taxable Income)During 2014, Cumpuinc’s first year of operations, the company reports pretax financial income at $231,000. Cumpuinc’s enacted tax rate is 40% for 2014 and 2015 and 30% for all later years.

E19-18B (Three Differences, Multiple Rates, Future Taxable Income)During 2014, Cumpuinc’s first year of operations, the company reports pretax financial income at $231,000. Cumpuinc’s enacted tax rate is 40% for 2014 and 2015 and 30% for all later years. Cumpuinc expects to have taxable income in each of the next 5 years. The effects on future tax returns of temporary differences existing at December 31, 2014, are summarized below.

                                                                                                     Future Years                                                             

                                                       2015                2016                2017                 2018               2019                 Total

Future taxable (deductible)

amounts:

Warranty costs                         $(20,000)      $(60,00             $(25,000)                                                       $(105,000) 

Depreciation                              (20,000)         12,000              12,000             $12,000       $12,000              28,000 

Installment sales                        60,000           75,000                                                                                        135,000

Instructions

(a) Complete the schedule below to compute deferred taxes at December 31, 2014.

                                                          Future Taxable

                                                                                                    December 31, 2014

                                                         (Deductible)                 Tax                 Deferred Tax   

Temporary Difference                   Amounts                     Rate         (Asset)       Liability

Warranty costs                              $(105,000) 

Depreciation                                       28,000 

Installment sales                              135,000

Totals $

(b) Compute taxable income for 2014.

(c) Prepare the journal entry to record income tax payable, deferred taxes, and income tax expense for 2014.