Fairfax Company had a balance in Deferred Tax Liability of $840 on December 31, 2014, resulting from depreciation timing differences. Differences in tax and accounting depreciation for assets purchased on January 1, 2014, are as follows:
Financial Tax
Year Depreciation Depreciation
2014 $ 4,000 $ 6,800
2015 4,000 5,200
2016 4,000 2,400
2017 4,000 1,600
$16,000 $16,000
In addition to the 2014 depreciation timing difference, Fairfax Company expensed $2,000 of warranty costs that will be deducted for tax purposes when paid in future years. Fairfax's taxable income in 2014 was $35,000. The 2014 income tax rate was 35%, and no changes in the tax rate for future years have been enacted.
Required: Prepare the income tax journal entry for the Fairfax Company for December 31, 2014.