Marin Company, which began operations at the beginning of 2015, produces various

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Marin Company, which began operations at the beginning of 2015, produces various products on a contract basis. Each contract generates a gross profit of $76,000. Some of Marin's contracts provide for the customer to pay on an installment basis. Under these contracts, Marin collects one-fifth of the contract revenue in each of the following four years. For financial reporting purposes, the company recognizes gross profit in the year of completion (accrual basis). For tax purposes, Marin recognizes gross profit in the year cash is collected (installment basis) Presented below is information related to Marin's operations for 2017: 1. In 2017, the company completed seven contracts that allow for the customer to pay on an installment basis. Marin recognized the related gross profit of $532,000 for financial reporting purposes. It reported only $106,400 of gross profit on installment sales on the 2017 tax return. The company expects future collections on the related installment receivables to result in taxable amounts of $106,400 in each of the next four years. 2. In 2017, nontaxable municipal bond interest revenue was $25,700 3. During 2017, nondeductible fines and penalties of $26,400 were paid 4. Pretax financial income for 2017 amounts to $510,000 5. Tax rates (enacted before the end of 2017) are 50% for 2017 and 40% for 2018 and later 6. The accounting period is the calendar year 7. The company is expected to have taxable income in all future years 8. SPrepare the journal entry to record income taxes for 2017. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit

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Pretax Financial income 510000 Permanent Difference: Bond Interes Revenue - Non Taxable -25700 Fine and Penalties-Non Deductible 26400 Timing Difference: Excess Gross profit as per books -425600 (532000-106400) Taxable Income for 2017 85100 Income Tax rate for 2017 50% Income Tax Payable for 2017 42550 Future Taxable Amount 425600 (106400)*4 Income Tax Rate 40% Tax Amount to be paid in Future 170240 (Liability) Journal Entry: Debit Credit Income Tax Expense 212790 Income Tax Payable 42550 Deferred Tax Liability 170240

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