The following information has been obtained for Gocker Corporation.

1. Prior to 2020, taxable income and pretax financial income were identical.

2. Pretax financial income is $1,700,000 in 2020 and $1,400,000 in 2021.

3. On January 1, 2020, equipment costing $1,200,000 is purchased. It is to be depreciated on a straight-line basis over 5 years for tax purposes and over 8 years for financial reporting purposes.

4. Interest of $60,000 was earned on tax-exempt municipal obligations in 2021.

5. Included in 2021 pretax financial income is a gain on discontinued operations of $200,000, which is fully taxable.

6. The tax rate is 20% for all periods.

7. Taxable income is expected in all future years.

Instructions

a. Compute taxable income and income taxes payable for 2021.

b. Prepare the journal entry to record 2021 income tax expense, income taxes payable, and deferred taxes.

c. Prepare the bottom portion of Gocker’s 2021 income statement, beginning with “Income from continuing operations before income taxes.”

d. Indicate how deferred income taxes should be presented on the December 31, 2021, balance sheet.