The accounting records of Shinault Inc. show the following data for 2019.
1. Equipment was acquired in early January for $300,000. Straight-line depreciation over a 5-year life is used, with no residual value. For tax purposes, Shinault used a 30% rate to calculate depreciation.
2. Interest revenue on governmental bonds totaled $4,000.
3. Product warranties were estimated to be $50,000 in 2019. Actual repair and labor costs related to the warranties in 2019 were $10,000. The remainder is estimated to be paid evenly in 2020 and 2021.
4. Sales on an accrual basis were $100,000. For tax purposes, $75,000 was recorded on the installment-sales method.
5. Fines incurred for pollution violations were $4,200.
6. Pretax financial income was $750,000. The tax rate is 30%.
Instructions
a. Prepare a schedule starting with pretax financial income in 2019 and ending with taxable income in 2019.
b. Prepare the journal entry for 2019 to record income taxes payable, income tax expense, and deferred income taxes.