Klerk Company had four temporary differences between its pretax financial income and its taxable income during 2007, as follows:
Number Temporary Difference
1......Gross profit on certain installment sales is recognized under the accrual method for financial reporting and under the installment method for income taxes
2......MACRS depreciation is used for income taxes; a different depreciation method is used for financial reporting
3......Rent receipts are included in taxable income when collected in advance; rent revenue is recognized under the accrual method for financial reporting
4.....Warranty expense is estimated for financial reporting; warranty costs are deducted as incurred for income taxes At the beginning of 2007, the company 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, the company earned taxable income of $270,000 for 2007. The company€™s accountant has prepared the following schedule showing the total future taxable and deductible amounts at the end of 2007 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 2007 is 40%, but in 2006 Congress enacted a 30% tax rate for 2008 and future years. During 2007, for financial accounting purposes, the company reported revenues of $750,000 and expenses of $447,100. The deferred tax 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 the income tax journal entry of the Klerk Company for 2007.
2. Prepare a condensed 2007 income statement for the Klerk Company.
3. Show how the income tax items are reported on Klerk Company€™s December 31, 2007 balancesheet.

Future Taxable Amounts Future Deductible Amounts #1 #2 #3 S20,000 #4 $55,300 $77,900 $241,000