1. EMC began operations during 2004. Taxable income in 2005 was $829,000. Basis differences asof 12/

1. EMC began operations during 2004. Taxable income in 2005 was $829,000. Basis differences asof 12/31/04 and 12/31/05 are as follows:Description of differenceProperty, Plant, & Equipment, net:GAAP basisTax basisBasis difference12/31/04Investments – TradingGAAP basis (fair value)Tax basis (cost or amortized cost)Basis differenceThe enacted income tax rate is 40% for 2004 and all future years.12/31/05$1,102,0001,000,000$102,000$785,000903,000($118,000)$1,880,0001,800,000$80,000$823,000948,000($125,000)Requirement:Prepare the income tax journal entries that EMC should make for the year ended 12/31/05.2. For the current year ($ in millions), Centipede Corp. had $80 in pretax accounting income. Thisincluded meals and entertainment expense of $8 and $20 in depreciation expense. For incometax purposes, MACRS depreciation amounted to $23.1)What type of differences, permanent differences or temporary differences, does Centipede Corp.have for the current year?2)Prepare Centipede’s journal entry to recognize income taxes payable for the current year.Assume there were no other temporary or permanent differences. Centipede’s tax rate for all relevantyears is 40%.3)Centipede’s comparative balance sheets for two previous years show the following balances fordeferred tax assets and liabilities:Deferred Tax AssetDeferred Tax Liability12/31/06$3 million$6 million12/31/05$1.4 million$4.8 millionPrepare Centipede’s deferred tax journal entry for the year ended 12/31/06. Note that you do not haveenough information to determine how Centipede calculated its DTA and DTL balances.