Wee Corporation began operations in 2011. It reported book income or loss of $(4,000), $5,000, and $5,000 during 2011-2013 respectively.

Income (Loss) Before Tax

$25,000

$(20,000)

Other information:

1.    Installment sales are taxed when collected, equally in 2016-2018.

2.    Interest income is earned on tax-exempt securities.

3.    Bad debts are deductible for taxes when the accounts are written off, equally in 2015 and 2016.

4.    Depreciation expense will reverse equally in 2015 and 2016.

5.    Wee determined that 60% of net operating loss carryforward would not be realized. Wee expects to earn no taxable income in 2015 and 2016.

6.    On December 31, 2014, Congress enacted new tax rates, effective January 1, 2015. The new rates will be

                                               Year                           Rate

                                               2015                           20%

                                               2016 and beyond        40%

1.    Prepare a schedule of Wee’s temporary differences and carryforwards and related deferred tax assets and liabilities at December 31, 2013.

Temporary difference and Carryforwards           Rate                DTA               DTL

                 Taxable / (Deductible)

2.    Prepare a schedule of Wee’s temporary differences and carryforwards and related deferred tax assets and liabilities at December 31, 2014.

Temporary difference and Carryforwards           Rate                DTA               DTL

                 Taxable / (Deductible)

3.    Prepare Wee’s journal entries for 2014 taxes.

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