Deferred income taxes, and income taxes payable

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1. (Two Temporary Differences, Multiple Rates, Future Taxable Income) Flynn Inc. has two temporary differences at the end of 2010. The first difference stems from installment sales, and the second one results from the accrual of a loss contingency. Flynn's accounting department has developed a schedule of future taxable and deductible amounts related to these temporary differences as follows.
As of the beginning of 2010, the enacted tax rate is 34% for 2010 and 2011, and 38% for 2012-2015. At the beginning of 2010, the company had no deferred income taxes on its balance sheet. Taxable income for 2010 is $400,000. Taxable income is expected in all future years. 

(a) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2010.

(b) Indicate how deferred income taxes would be classified on the balance sheet at the end of 2010. 

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Reference no: EM131108790

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