At the end of 2007, Fulhage Company reported taxable income of $9,000 and pretax financial income of $10,600. The difference is due to depreciation for tax purposes in excess of depreciation for financial reporting purposes. The income tax rate for the current year is 40%, but Congress has enacted tax rates of 35% for 2008 and 30% for 2009 and beyond.
Fulhage Company has calculated the excess of its financial depreciation over its tax depreciation for future years as follows: 2008, $600; 2009, $700; and 2010, $300. Prior to 2007, the company had no deferred tax liability or asset.
Required
Prepare the income tax journal entry of the Fulhage Company at the end of 2007.