Question - Time Inc. had an operating income of $50,000 for 2009, an operating income of $80,000 for 2010 and an operating income of $60,000 for 2011 before the issue of timing of recognition for the prepaid subscription revenue of $290,000. A closer look at the tax and book treatments for the prepaid subscription revenue revealed that it was reported as a taxable income in the tax return of 2009, but was recognized in the book or the published financial statements as follows:

2009 - $ 90,000

2010 - 140,000

2011 - 60,000

$290,000

The enacted tax rates for this year and the next two years are as follows:

2009 - 40%

2010 - 34%

2011 - 34%

Prepare journal entries to record income taxes payable and deferred income taxes for 2009, 2010 and 2011. The future tax-rate change is unknown to the company. Therefore, you need to do a rate-adjustment for 2010.