On December 31,2009,Loran Corporation Reported a Deferred Tax Liability Totaling

question 47

Essay

On December 31,2009,Loran Corporation reported a deferred tax liability totaling $12,000,resulting from depreciation timing differences pertaining to a depreciable asset purchased during 2009.Loran uses straight-line depreciation over four years for GAAP (book)purposes; for tax purposes,the depreciation deduction is 40% of cost during 2009,30% of cost during 2010,20% of cost during 2011,and 10% of cost during 2012.During 2010,Loran expensed $80,000of warranty costs that will be deducted for tax purposes in future years.Loran also accrued revenue totaling $135,000 which is taxable in 2011.Loran's GAAP (book)income before taxes during 2010 totaled $380,000The marginal income tax rate is 40% for all years.
Required:
(1)What is the taxable income?
(2)Prepare the journal entry to record income tax expense for the year ended December 31,2010. 

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Definitions:

Services Rendered

Work or assistance provided by someone following a request or agreement.

Payment Schedule

A predetermined plan outlining the specific dates and amounts for payments to be made by one party to another, often used in billing and financial agreements.

Charges

Fee for services rendered.

Double-Entry Bookkeeping System

A bookkeeping method in which every transaction is entered twice, to two separate accounts, with one being a debit and the other a credit, to maintain the balance of the accounting equation.