Question

The accounting records of Stellar Inc. show the following data for 2017 (its first year of operations).

1.		Life insurance expense on officers was $8,800.
2.		Equipment was acquired in early January for $319,000. Straight-line depreciation over a 5-year life is used, with no salvage value. For tax purposes, Stellar used a 30% rate to calculate depreciation.
3.		Interest revenue on State of New York bonds totaled $3,600.
4.		Product warranties were estimated to be $54,500 in 2017. Actual repair and labor costs related to the warranties in 2017 were $10,800. The remainder is estimated to be paid evenly in 2018 and 2019.
5.		Gross profit on an accrual basis was $93,000. For tax purposes, $74,700 was recorded on the installment-sales method.
6.		Fines incurred for pollution violations were $3,800.
7.		Pretax financial income was $748,300. The tax rate is 30%.

Prepare a schedule starting with pretax financial income in 2017 and ending with taxable income in 2017. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Pretax Financial Income	748,300
Permanent Differences
Insurance Expense	8,800
Bond Interest Revenue	(3,600)
Pollution Fines	3,800
	757,300
Temporary Differences
Depreciation Expense	(31,900)
Installment Sales	(18,300)
Warranty Expense	43,700
Taxable Income	750,800

Prepare the journal entry for 2017 to record income taxes payable, income tax expense, and deferred income taxes. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit
Income Tax Expense
Deferred Tax Asset
Income Tax Payable
Deferred Tax Liability

Answer 1

Answer
Journal Entry
Date	Particulars	Dr. amt.	Cr. Amt
2017	Income Tax Expense                                      Dr.	227,190		$757,300 X 30%
	Deferred Tax Asset                                         Dr.	13,110		$43,700 X 30%
	To Deferred Tax Liability		9,570	$31,800 X 30%
	To Income Tax Payable		225,240	$750,800 X 30%