You are internal auditor for Shannon Supplies, Inc., and are reviewing the company's preliminary financial statements. The statements prepared after making the adjusting entries, but before closing entries for the year ended December 31, 2018, are as follows SHANNON SUPPLIES, INC. Balance Sheet December 31, 2018 ($ in 000s) AssetS Cash $2,300 Investments 200 Accounts receivable, net Inventory Property, plant, and equipment Less: Accumulated depreciation 710 960 1,140 (660) $4,650 Total assets Liabilities and Shareholders' Equity Accounts payable and accrued expenses Income tax payable Common stock, $1 par Additional paid-in capital Retained earnings $3,220 120 100 650 560 Total liabilities and shareholders equity $4,650 SHANNON SUPPLIES, INC. Income Statement For the Year Ended December 31, 2018 ($ in 000s) Sales revenue $3,200 Operating expenses: Cost of goods sold Selling and administrative Depreciation $1,040 886 94 2,020 $1,180 (472) Income before income tax Income tax expense $ 708 Net income Shannon's income tax rate was 40% in 2018 and previous years. During the course of the audit, the following additional information a. Shannon's Investment portfollo consists of blue chlp stocks held for long-term appreciation. To ralse working capital, some of the shares with an original cost of $170,000 were sold In May 2018. Shannon accountants deblted cash and credited Investments for the $200,000 proceeds of the sale b. At December 31, 2018, the falr value of the remalning securities In the portfollo was $219,000 C. The state of Alabama filed sult against Shannon In October 2016, seeking cMIl penaltles and Injunctive rellef for violations of environmental regulations regulating emissions. Shannon's legal counsel previously belleved that an unfavorable outcome was not probable, but based on negotlations with state attorneys In 2018, now belleve eventual payment to the state of $120,000 Is probable, most likely to be pald In 2021. d. The $960,000 Inventory total, whlch was based on a physical count at December 31, 2018, was priced at cost. Based on your conversations with company accountants, you determined that the Inventory cost was overstated by $122,000. e. Electronic counters costing $70,000 were added to the equipment on December 29, 2017. The cost was charged to repalrs. f. Shannon's equipment, on which the counters were Installed, had a remalning useful life of four years on December 29, 2017, and is belng depreclated by the straight-lne method for both financial and tax reporting. g. A new tax law was enacted in 2018 which will cause Shannon's income tax rate to change from 40% to 35% beginning in 2019. Requlrec Prepare Journal entries to record the effects on Shannon's accounting records at December 31, 2018, for each of the ltems described above. (If no entry is required for a transactlon/event, select "No Journal entry required" In the first account field. Do not round ntermedlete calculatlons. Enter your answers In whole dollers not In thousands of dollars.) View transaction list Journal entry worksheet 1 2 6 4 6 6 3 5 Record the income tax expense Note: Enter debits before credits Transaction General Journal Debit Credit eferred tax asset 45,850 Income tax payable 539,800 Income tax expense -493,950 Clear entry Record entry View general jourmal