McMohan Corporation

McMohan Corporation had the following balance sheet accounts at the end of year 1 and year 2:

YEAR 1 YEAR 2

	Book	Tax	Book	Tax
Bad Debt reserve	65,000	0	50,000	0
Inventory	600,000	625,000	750,000	800,000
Accumulated Depreciation	200,000	400,000	300,000	450,000

Assuming McMohan's book income (after adjusting for permanent differences) is $100,000:

1) What is McMohan's book tax expense for Year 2?

2) Calculate McMohan's deferred tax assets and liabilities at the end of Year 2

3) What is the Journal entry McMohan will make to properly record its year 2 tax provision (i.e., current tax expense, taxes payable, and any changes to its deferred tax assets and/or liabilities)?

Assume a 34% tax rate for all your computation.