Claremont Enterprises, Inc. started operations in early 2015. During the first year of operations, Claremont generated sales of $2.4 million, and at year-end, had $250,000 in outstanding accounts receivable. Using collection estimates provided by its controller, the company estimated that its bad debt expense for 2015 would be $7,735.

During its second year of operations, Claremont generated sales of $4.1 million, and at year-end, had $750,000 in outstanding accounts receivable. Using an aging schedule, the controller estimated that Claremonts bad debt expense for 2016 would be $13,500. In June of 2016, Claremont received confirmation that one of its outstanding accounts receivable in the amount of $12,500 had gone into bankruptcy, and thus would not be collected.

In discussions with the firms independent auditor, the CFO of Claremont Enterprises learned that while an estimate of expected uncollectible accounts was permitted for purposes of preparing its U.S. GAAP based annual report, the U.S. Treasury Department only allowed firms to deduct actual, known uncollectible accounts for purposes of preparing their income tax returns.

Prepare a schedule showing the companys income tax expense, its income tax payable, and its deferred income tax balance for 2015 and 2016. Assume an effective tax rate of 30 percent and that Claremont has no other expenses other than the bad debt expense.

Round answers to the nearest whole number, when applicable.

Income statement for accounting purposes:

	2015	2016
Sales	Answer	Answer
Less: Bad debt expense	Answer	Answer
Net income before taxes	Answer	Answer
Less: Income tax expense	Answer	Answer
Net income	Answer	Answer

Income statement for income tax purposes

	2015	2016
Sales	Answer	Answer
Less: Bad debt expense	Answer	Answer
Net income before taxes	Answer	Answer
Less: Income tax expense	Answer	Answer
Net income	Answer	Answer

Use negative signs with answers if there is a deferred tax benefit and/or to represent a cumulative deferred tax asset.

Year	Deferred Tax Expense/(Benefit)		Cumulative Deferred Tax Liability/(Asset)
2015		Answer		Answer
2016		Answer		Answer