Reference no: EM13597799

The following information has been obtained for the Gocker Corporation.

1. Prior to 2010, taxable income and pretax financial income were identical.
2. Pretax financial income is $1,700,000 in 2010 and $1,400,000 in 2011.
3. On January 1, 2010, equipment costing $1,200,000 is purchased. It is to be depreciated on a straight-line basis over 5 years for tax purposes and over 8 years for financial reporting purposes. (Hint: Use the half-year convention for tax purposes, as discussed in Appendix 11A.)
4. Interest of $60,000 was earned on tax-exempt municipal obligations in 2011.
5. Included in 2011 pretax financial income is an extraordinary gain of $200,000, which is fully taxable.
6. The tax rate is 35% for all periods.
7. Taxable income is expected in all future years.

Compute taxable income and income tax payable for 2011.
Taxable income = ?
Income tax payable =?

• Prepare the journal entry to record 2011 income tax expense, income tax payable, and deferred taxes.
• Prepare the bottom portion of Gocker's 2011 income statement, beginning with "Income before income taxes and extraordinary item."
• Indicate how deferred income taxes should be presented on the December 31, 2011, balance sheet.