Reference no: EM132094338

Question - At the beginning of 2013, Norris Company had a deferred tax liability of $5,800, because of the use of MACRS depreciation for income tax purposes and units-of-production depreciation for financial reporting. The income tax rate is 30% for 2012 and 2013, but in 2012 Congress enacted a 40% tax rate for 2014 and future years. Norris's accounting records show the following pretax items of financial income for 2013: income from continuing operations, $151,500 (revenues of $388,000 and expenses of $236,500); gain on disposal of Division F, $20,800; extraordinary loss, $10,800; loss from operations of discontinued Division F, $10,600; and prior period adjustment, $14,400, due to an error that understated revenue in 2012. All of these items are taxable; however, financial depreciation for 2013 on assets related to continuing operations exceeds tax depreciation by $6,500. Norris had a retained earnings balance of $170,000 on January 1, 2013, and declared and paid cash dividends of $32,000 during 2013.

1. Prepare Norris's income tax journal entry at the end of 2013.

2. Prepare Norris's 2013 income statement.

3. Prepare Norris's 2013 statement of retained earnings.

4. Show the related income tax disclosures on Norris's December 31, 2013, balance sheet.