6. ABC Co. at the end of 2018, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

Pretax financial income ---$ 500,000

Estimated litigation expense--- 1,250,000

Installment sales ---(1,000,000)

Taxable income ---$ 750,000

The estimated litigation expense of $1,250,000 will be deductible in 2020 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $500,000 in each of the next two years. The estimated liability for litigation is classified as non-current and the installment accounts receivable are classified as $500,000 current and $500,000 non-current. The income tax rate is 30% for all years.

Instructions:

a) Calculate the income tax payable and income tax expense for 2018 (Show all your computations)(10 points)

b) Present relevant journal entries for 2018. (5 points)