Pole Co. at the end of 2010, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

Pretax financial income $420,000

Extra depreciation taken for tax purposes -1,050,000

Estimated expenses deductible for taxes when paid 840,000

Taxable income $210,000

Use of the depreciable assets will result in taxable amounts of $350,000 in each of the next three years. The estimated litigation expenses of $840,000 will be deductible in 2013 when settlement is expected.

Instructions

(a) Prepare a schedule of future taxable and deductible amounts.

(b) Prepare the journal entry to record income tax expense, deferred taxes, and income taxes payable for 2010, assuming a tax rate of 40% for all years.