The following events are recorded on the books of the K. Schipper Company during a recent year.

(1) Machinery costing \(\$ 100,000\) is acquired. Estimated service life is 5 years with no salvage value.

(2) Installment sales of \(\$ 800,000\) are made; cost of goods sold is \(\$ 600,000\). During the year, \(\$ 500,000\) of this amount is collected.

(3) The estimated future warranty liability on sales is charged to warranty expense for the year and amounts to \(\$ 100,000\). Actual expenditures for warranty repairs under the agreements during the year total \(\$ 25,000\). Tax regulations require that deductions from revenues for warranty expense cannot exceed actual expenditures for that purpose.

(4) Outlays for research and development are \(\$ 50.000\). Management estimates that benefits of this R\&D outlay will accrue to the company over a 5 -year period.

Recall the "least and latest rule," and make the unrealistic assumption that only these four events occurred during the year. Compute the income before taxes, tax liabilities, and income after taxes for the \(\mathrm{K}\). Schipper Company. If there is a difference between tax expense and tax currently payable, indicate how this difference is recorded. Assume a tax rate of 40 percent. Use straight-line depreciation and completed-sales revenue recognition for financial reports. Use the sum-of-the-years'-digits method of depreciation and cash-collection revenue recognition for tax purposes.