Fairfax Company had a balance in Deferred Tax Liability of $840 on December 31, 2014, resulting from depreciation timing differences. Differences in tax and accounting depreciation for assets purchased on January 1, 2014, are as follows:
|
|
Financial
|
Tax
|
|
Year
|
Depreciation
|
Depreciation
|
|
2014
|
$ 4,000
|
$ 6,800
|
|
2015
|
4,000
|
5,200
|
|
2016
|
4,000
|
2,400
|
|
2017
|
4,000
|
1,600
|
|
Total
|
$16,000
|
$16,000
|
In addition to the 2014 depreciation timing difference, Fairfax Company expensed $2,000 of warranty costs that will be deducted for tax purposes when paid in future years. Fairfax's taxable income in 2014 was $35,000. The 2014 income tax rate was 35%, and no changes in the tax rate for future years have been enacted.
Required: Prepare the income tax journal entry for the Fairfax Company for December 31, 2014.