PART 1 : ABC Company had the following details regarding deferred taxes in 2013:

Pre-Tax Financial Income                          140,000

Tax-Exempt Municipal Income                      5,000

Non-Deductible Fines                                15,000

Taxable Rental Revenue                           30,000

Excess Depreciation on Tax Return        45,000

Income Tax Rate                                              35%

-The rental revenue is from rents collected in advance. The $30,000 will be earned evenly over the next two years (per GAAP).

-The excess depreciation will reverse evenly over the next three years.

1) Calculate taxable income

2) Prepare the journal entry(s) to record the income tax expense and deferred taxes

Please show work.

PART 2:

In 2014, ABC Company had the following data:

Pre-Tax Financial Income                                105,000

Tax-Exempt Interest                                         5,000

Less Rental Revenue (non-taxable)                 15,000 (reversal from 2013)

Add Reversal of Depreciation                           15,000 (reversal from 2013)

Tax Rate                                                            35%

-There were no other differences from 2014 transactions.

1) Calculate the taxable income for 2014

2) Prepare the journal entry for income tax expense and deferred taxes

3) Calculate the ending balance in deferred tax asset and deferred tax liability at the end of 2014