Quick Company reports the following revenues and expenses in its pretax financial income for the year ended December 31, 2007:

Revenues ........$229,600

Expenses ............(160,100)

Pretax financial income ..$ 69,500

The revenues included in pretax financial income are the same amount as the revenues included in the company’s taxable income. A reconciliation of the expenses reported for pretax financial income to the expenses reported for taxable income, however, reveals four differences:

1. Depreciation deducted for financial reporting exceeded depreciation deducted for income taxes by $11,000

2. Percentage depletion deducted for income taxes exceeded cost depletion deducted for financial reporting by $15,600

3. Warranty costs deducted for income taxes exceeded warranty expenses deducted for financial reporting by $8,900

4. Legal expense of $9,800 was deducted for financial reporting; it will be deducted for income taxes when paid in a future year

The company expects its percentage depletion to exceed its cost depletion in each of the next five years by the same amount as in 2007. At the end of 2007 the other three expenses are expected to result in total future taxable or deductible amounts as follows:

Totals

Future Taxable Amounts

Depreciation expense difference ......$63,000

Future Deductible Amounts

Warranty expense difference .......48,400

Legal expense difference .........9,800

At the beginning of 2007 the company had a deferred tax liability of $22,200 related to the depreciation difference and a deferred tax asset of $17,190 related to the warranty difference. The income tax rate for 2007 is 35%, but in 2006 Congress enacted a 30% rate for 2008 and future years.

Required

1. Compute the Quick Company’s taxable income for 2007.

2. Prepare the income tax journal entry of the Quick Company for 2007. Assume no valuation allowance is necessary.

3. Prepare a condensed 2007 income statement for the Quick Company.