The accounting records of Anderson Inc. show the following data for 2008.
1. Life insurance expense on officers was $9,000.
2. Equipment was acquired in early January for $200,000. Straight-line depreciation over a 5-year life is used, with no salvage value. For tax purposes, Anderson used a 30% rate to calculate depreciation.
3. Interest revenue on State of New York bonds totaled $4,000.
4. Product warranties were estimated to be $60,000 in 2008. Actual repair and labor costs related to the warranties in 2008 were $10,000. The remainder is estimated to be incurred evenly in 2009 and 2010.
5. Sales on an accrual basis were $100,000. For tax purposes, $75,000 was recorded on the installment sales method.
6. Fines incurred for pollution violations were $4,200.
7. Pretax financial income was $850,000. The tax rate is 30%.
Instructions
(a) Prepare a schedule starting with pretax financial income in 2008 and ending with taxable income in 2008.
(b) Prepare the journal entry for 2008 to record income tax payable, income tax expense, and deferred income taxes.