Zurich Company reports pretax financial income of $125,000 for 2017. The following items cause taxable income to be different from pretax financial income (1) Revenue recognized on books exceeds that on the tax return by $30,000. (2) Litigation expense of $75,000 is accrued on book but can be claimed on tax return only when the litigation is settled. (3) Premium of $15,000 for life insurance carried by the company on key officers is reported as expense on book. Zurich's tax is 30% for all years, and the company expects to report taxable income in all future years. There are a $3,000 deferred tax asset and $12,000 deferred tax liability at the beginning of 2017.

Required:

1. Compute taxable income in 2017 and complete the worksheet below

	Prior Yrs	Current Yr	Future Yr1	Future Yr2	Future Yr3
Pretax fin Income
Taxable Income
Tax rate
Income tax payable
			Deferred tax assets	Deferred tax liabilities
Desired ending balance
Beginning balance
change

2. Prepare the journal entry for 2017 to record income tax expense, deferred taxes, and income tax payable

3. What is the effective tax rate for 2017? Effective tax rate-income tax expense/pretax financial income