1 Problem 16-7 (Algo) Multiple differences; calculate taxable income: balance sheet classification (L016-2 16-3, 16-5, 16-8] 10 points 02.16.46 Sherrod, Inc., reported pretax accounting income of $82 million for 2021. The following information relates to differences between pretax accounting Income and taxable income: a. Income from installment sales of properties included in pretax accounting income in 2021 exceeded that reported for tax purposes by $7 million. The installment receivable account at year end 2021 had a balance of 58 million representing portions of 2020 and 2021 installment sales) expected to be collected equally in 2022 and 2023 b. Sherrod was assessed a penalty of $3 million by the Environmental Protection Agency for violation of a federal law in 2021. The fine is to be paid in equal amounts in 2021 and 2022 Sherrod rents its operating facilities but owns one asset acquired in 2020 at a cost of $84 million Depreciation is reported by the straight line method, assuming a four year useful life. On the tax return, deductions for depreciation will be more than straight-line depreciation the first two years but less than straight line depreciation the next two years (S in millions Income Statement Tax Return Difference 2020 $ 21 $ 27 (6) 2021 21 (16) 21 1 2023 21 2 $14 Reces 37 3 14 d. For tax purposes, warranty expense is deducted when costs are incurred the balance of the warranty liability was 51 million at the end of 2020. Warranty expense of $5 million is recognized in the income statement in 2021. $3 million of cost is incurred 2020 and another $3 million of cost anticipated in 2022 AL December 31, 2021 the warranty Bability is $3 million after adjusting entries In 2021. Sherrod accrued an expense and related liability for estimated pak future absences of $16 million relating to the company's new pald Vacation program. Future compensation will be deductible on the tax return when actually paid during the next two years $10 milion in 2022 million in 2023 1 depreciation the first two years but less than straight line depreciation the next two years is in millions): Income Statement Tax Return Difference 2020 $ 21 2021 $ 27 $ (6) 21 37 2022 (16) 21 8 2023 21 2 14 584 $ 0 10 points $14 02:16:22 BOOK Print d. For tax purposes. warranty expense is deducted when costs are incurred. The balance of the warranty liability was $1 million at the end of 2020. Warranty expense of $5 million is recognized in the income statement in 2021 $3 million of cost is incurred in 2021 and another $3 million of cost anticipated in 2022. At December 31, 2021, the warranty liability is $3 million (after adjusting entries) e. In 2021. Sherrod accrued an expense and related liability for estimated paid future absences of $16 million relating to the company's new paid vacation program. Future compensation will be deductible on the tax return when actually paid during the next two years ($10 million in 2022: $6 million in 2023) During 2020, accounting income included an estimated loss of $2 million from having accrued a loss contingency. The loss is paid in 2021, at which time it is tax deductible References Balances in the deferred tax asset and deferred tax liability accounts at January 1, 2021, were $0.8 million and $1.8 million respectively. The enacted tax rate is 25% each year. Required: 1. Determine the amounts necessary to record income taxes for 2021, and prepare the appropriate journal entry 2. What is the 2021 net income? 3. Show how any deferted tax amounts should be classified and reported in the 2021 balance sheet. Complete this question by entering your answers in the tabs below