Problem:
Starfleet Corporation has one temporary difference at the end of 2012 that will reverse and cause taxable amounts of $56,530 in 2013, $61,910 in 2014, and $80,270 in 2015. Starfleet's pretax financial income for 2012 is $442,490, and the tax rate is 40% for all years. There are no deferred taxes at the beginning of 2012.
Required:
Question 1: Compute taxable income and income taxes payable for 2012.
Question 2: Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2012.
Note: Provide support for your rationale.