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 book 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 rate 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 a $12,000 deferred tax liability at the beginning of 2017. Required: 1. Compute taxable income in 2017 and complete the worksheet below (7 points). Prior Yrs Current Yr Future Yr1 Future Yr2 Future Yr3 Pre-tax fin. Income (Book income GAAP) Taxable income (Tax income IRS) 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 (1 point). 3. What is the effective tax rate for 2017? Effective tax rate = income tax expense/pre-tax financial income (1 point). 4. On December 31, 2017 balance sheet, does Zurich report a net deferred tax asset or liability? In what amount? (1