Chapter 17, Problem 17.6E

Temporary Differences, Deferred Tax Assets and Liabilities. Fortunes Hotel Associates reported the following income information for the current year.

	Current Year
Account	GAAP	Tax
Sales	$500,000	$500,000
Operating expenses	(280,000)	(280.000)
Depreciation expense	(70,000)	(100,000)
Estimated warranty cost	(30,000)	0
Actual warranty repairs	0	(10,000)
Income before tax	$120,000
Taxable income		$110,000
Tax rate		× 35%
Tax payable		$38,500

Required

1. a. Prepare the journal entry to record the tax provision for the current year
2. b. Are there any differences between the federal income tax rate and Fortunes’ effective tax rate? Explain.