The accounting records of Shinault Inc. show the following data for 2020 (its first year of operations).1.    Life insurance expense on officers was $9,000.2.    Equipment was acquired in early January for $300,000. Straight-line depreciation over a 5-year life is used, with no salvage value. For tax purposes, Shinault 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 $50,000 in 2020. Actual repair and labor costs related to the warranties in 2020 were $10,000. The remainder is estimated to be paid evenly in 2021 and 2022.5.    Gross profit on an accrual basis was $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 $750,000. The tax rate is 30%.Instructionsa.    Prepare a schedule starting with pretax financial income in 2020 and ending with taxable income in 2020.b.    Prepare the journal entry for 2020 to record income taxes payable, income tax expense, and deferred income taxes.

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Asked Jan 27, 2020
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The accounting records of Shinault Inc. show the following data for 2020 (its first year of operations).

1.    Life insurance expense on officers was $9,000.

2.    Equipment was acquired in early January for $300,000. Straight-line depreciation over a 5-year life is used, with no salvage value. For tax purposes, Shinault 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 $50,000 in 2020. Actual repair and labor costs related to the warranties in 2020 were $10,000. The remainder is estimated to be paid evenly in 2021 and 2022.

5.    Gross profit on an accrual basis was $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 $750,000. The tax rate is 30%.

Instructions

a.    Prepare a schedule starting with pretax financial income in 2020 and ending with taxable income in 2020.

b.    Prepare the journal entry for 2020 to record income taxes payable, income tax expense, and deferred income taxes.

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