Peterson Company has computed its pretax financial income to be $66,000 in 2019 after including the effects of the appropriate items from the following information:

Peterson’s accountant has prepared the following schedule showing the future taxable and deductible amounts at the end of 2019 for its three temporary differences:
.....................................................................................Totals
Future Taxable Amounts
Depreciation difference .........................................$33,800
Accrual-basis vs. cash-basis excess .......................26,700
Future Deductible Amounts
Warranty difference ................................................56,500
At the beginning of 2019, Peterson had a deferred tax liability of $12,540 related to the depreciation difference and $4,710 related to the accrual-basis sales difference. In addition, it had a deferred tax asset of $14,850 related to the warranty difference. The current tax rate is 30%, and no change in the tax rate has been enacted for future years.

Required:
1. Compute Peterson’s taxable income for 2019.
2. Prepare Peterson’s income tax journal entry for 2019 (assume no valuation allowance is necessary).
3. Next Level Identify the permanent differences in Items 1 through 8 and explain why you did or did not account for them as deferred tax items in Requirement 2.

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1. Depreciation taken for tax purposes 2. Officers' life insurance premium expense recorded on accounting records 3. Interest revenue on investment in municipal bonds recorded on accounting records 4. Percentage depletion taken for tax purposes in excess of cost depletion taken for financial reporting purposes 5. Depreciation taken for financial reporting purposes 6. Actual product warranty costs deducted for tax purposes 7. Excess of accrual-basis sales over cash-basis sales recognized for tax purposes 8. Estimated product warranty expense recorded on accounting records $40,000 15,000 25,000 10,000 $48,000 20,000 11,000 27,000