Reference no: EM132911219

At the beginning of 2016, Norris Company had a deferred tax liability of $6,300, 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 2015 and 2016, but in 2015 Congress enacted a 38% tax rate for 2017 and future years.

Norris's accounting records show the following pretax items of financial income for 2016:

income from continuing operations, $122,300 (revenues of $353,300 and expenses of $231,000);

gain on disposal of Division F, $23,000;

loss from operations of discontinued Division F, $10,200; and

prior period adjustment, $15,200, due to an error that understated revenue in 2015.

All of these items are taxable; however, financial depreciation for 2016 on assets related to continuing operations exceeds tax depreciation by $4,000. Norris had a retained earnings balance of $160,900 on January 1, 2016, and declared and paid cash dividends of $33,600 during 2016.

Problem 1: Prepare Norris's income tax journal entry on December 31, 2016. Please show how income taxes payable was calculated.