Mighty Motors Ltd Offers a Warranty on All the Spare

Mighty Motors Ltd offers a warranty on all the spare parts it sells.This period the accrued warranty is $5000.For tax purposes there is no deduction for the warranty until payments are made.Mighty Motors also has equipment that has a useful life for accounting purposes of 4 years and for tax purposes 3 years.The equipment was purchased at the beginning of the current period,cost $9000 and has no residual value.The straight-line method of depreciation is used for both accounting and tax purposes.The accounting profit before tax this period is $80 000.The tax rate is 30%.What are the journal entries to record the tax expense and tax payable?

A) $\begin{array}{|l|l|r|r|}\hline \mathrm{Dr} & \text { Deferred tax asset } & \$ 1500 & \\\hline \mathrm{Cr} & \text { Income tax expense } & & \$ 1500 \\\hline\\\hline \text { Dr } & \text { Income tax expense } & \$ 225 & \\\hline \mathrm{Cr} & \text { Deferred tax liability } & & \$ 225 \\\hline\\\hline \text { Dr } & \text { Income tax expense } & \$ 25275 & \\\hline \mathrm{Cr} & \text { Tax payable } & & \$ 25275 \\\hline\end{array}$

B) $\begin{array}{|l|l|r|r|}\hline \mathrm{Dr} & \text { Deferred tax asset } & \$ 225 & \\\hline \mathrm{Cr} & \text { Income tax expense } & &{\$ 225} \\\hline & && \\\hline \mathrm{Dr} & \text { Income tax expense } & \$ 1500 & \\\hline \mathrm{Cr} & \text { Deferred tax liability } & & \$ 1500 \\\hline\\\hline \text { Dr } & \text { Income tax expense } & \$ 24000 & \\\hline \mathrm{Cr} & \mathrm{T} \text { Tax payable } & & \$ 24000 \\\hline\end{array}$

C) $\begin{array}{|l|l|r|r|}\hline \mathrm{Dr} & \text { Deferred tax asset } & \$ 5000 & \\\hline \mathrm{Cr} & \text { Income tax expense } & & \$ 5000 \\\hline\\\hline \mathrm{Dr} & \text { Income tax expense } & \$ 750 & \\\hline \mathrm{Cr} & \text { Deferred tax liability } &&{\$ 750} \\\hline & & & \\\hline \mathrm{Dr} & \text { Income tax expense } & \$ 25275 & \\\hline \mathrm{Cr} & \text { Tax payable } & & \$ 25275\\\hline\end{array}$

D) $$\begin{array} { | c | l | r | r | } \hline \text { Dr } & \text { Income tax expense } & \$ 1500 & \\\hline \mathrm { Cr } & \text { Deferred tax asset } & & \$ 1500 \\\hline & & & \\\hline \mathrm { Dr } & \text { Income tax expense } & \$ 225 & \\\hline \mathrm { Cr } & \text { Deferred tax liability } & &\$225 \\\hline & & & \\\hline \mathrm { Dr } & \text { Income tax expense } & \$ 24000 & \\\hline \mathrm { Cr } & \text { Tax payable } & & \$ 24000 \\\hline\end{array}$$