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INCOME TAXES
 12 Months Ended
Dec. 31, 2011
Notes to Financial Statements  
INCOME TAXES

 

NOTE 9 – INCOME TAXES

 

The provision for income taxes consists of:

 

   Year Ended December 31,
   2011  2010
       
Current tax expense          
Federal  $196,890   $(10,645)
State   23,036    26,996 
           
    219,926    16,351 
           
Deferred tax expense (benefit)          
Federal   258,888    225,540 
State   36,112    31,460 
           
    295,000    257,000 
           
Total  $514,926   $273,351 

 

The effective income tax rate differs from the federal statutory rate as follows:

 

   Year Ended December 31,
   2011  2010
       
Federal statutory rate   34.0%   34.0%
State taxes, net of federal benefit   4.7%   4.7%
Permanent differences   0.4%   3.2%
Adjustments to deferred tax asset   0.0%   (1.1)%
Prior period adjustment   (1.6)%   (.9)%
           
    37.5%   39.9%

 

Permanent differences consist primarily of nondeductible meals and entertainment and life insurance premiums.

  

Deferred tax assets and (liabilities) at December 31 consist of:

 

   2011  2010
           
Accounts receivable  $8,000   $4,000 
Deferred gain on sale-leaseback   97,000    109,000 
Stock compensation   —      6,000 
Other   40,000    37,000 
           
Total deferred tax assets   145,000    156,000 
           
Prepaids   (54,000)   (44,000)
Inventories   (851,000)   (235,000)
Depreciation   (345,000)   (687,000)
           
Total deferred tax liabilities   (1,250,000)   (966,000)
           
Net deferred tax liability  $(1,105,000)  $(810,000)