Klerk Company had four temporary differences between its pretax financial income and its taxable income during 2019 as follows:

At the beginning of 2019, Klerk had a deferred tax liability of $84,300 related to Temporary Difference #2 and a deferred tax asset of $21,090 related to Temporary Difference #4. Based on its tax records, Klerk earned taxable income of $270,000 for 2019. Kerk’s accountant has prepared the following schedule showing the total future taxable and deductible amounts at the end of 2019 for its four temporary differences:

The company has a history of earning income and expects to be profitable in the future. The income tax rate for 2019 is 40%, but in 2018 Congress enacted a 30% tax rate for 2020 and future years. During 2019, for financial accounting purposes, Klerk reported revenues of $750,000 and expenses of $447,100. The deferred taxes related to Temporary Differences #1, #2, and #4 are considered to be noncurrent by the company; the deferred tax related to Temporary Difference #3 is considered to be current.

Required:
1. Prepare Klerk’s income tax journal entry for 2019.
2. Prepare a condensed 2019 income statement for Klerk.
3. Show how the income tax items are reported on Klerk’s December 31, 2019, balance sheet.

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Number Temporary Difference Gross profit on certain sales is recognized under the accrual method for financial reporting and under the cash-basis method for income taxes. MACRS depreciation is used for income taxes; a different depreciation method is used for financial reporting. Rent receipts are included in taxable income when collected in advance; rent revenue is recognized under the accrual method for financial reporting. Warranty expense is estimated for financial reporting; warranty costs are deducted as incurred for income taxes. 4 Future Taxable Amounts #1 Future Deductible Amounts #2 #3 #4 $77,900 $241,000 $20,000 $55,300