Akai Company, which began operations at the beginning of 2021, produces various products on a contract basis. Each contract generates an income of 100,000. Some of Akais contracts provide for the customer to pay on an installment basis. Under these contracts, Akai collects one-fifth of the contract revenue in each of the following four years. For financial reporting purposes, the company recognizes income in the year of completion (accrual basis); for tax purposes, Akai recognizes income in the year cash is collected (installment basis). Akai reported pretax financial income of 600,000 for 2021, and of 520,000 for 2022. Tax rates enacted before the end of 2021 were 50%, but 40% for 2022 and later years. Akai uses the calendar year as its accounting period. Presented below is information related to Akais operations for 2021 and 2022.

Year 2021:

1. The company completed 7 contracts that allow for the customer to pay on an installment basis. The company expects future collections on the related receivables to result in taxable amounts of 140,000 in each of the next four years.

2. At the beginning of 2021, Akai purchased depreciable assets with a cost of 540,000. For financial reporting purposes, Akai depreciates these assets using the straight-line method over a 5-year service life. For tax purposes, the company uses the double-declining balance method over five years.

3. The company warrants its product for two years from the date of completion of a contract. At the yearend of 2021, the product warranty liability accrued for financial reporting purposes was 156,000, in which Akai expects to settle by expenditures of 56,000 in 2022 and 100,000 in 2023.

4. In 2021, non-taxable governmental bond interest revenue was 22,000. 5. During 2021, non-deductible fines and penalties of 30,000 were paid.

Year 2022:

1. In 2022, the company completed 5 new contracts that allow for the customer to pay on an installment basis. These installment sales created new installment receivables, Future collections of these receivables will result in reporting income of 100,000 for tax purposes in each of the next four years.

2. An analysis at the end of 2022 of the product warranty liability account showed the following details.

Balance of liability at beginning of 2022 156,000

Expense for 2022 income statement purposes 180,000

Amount paid for contracts completed in 2021 (56,000)

Amount paid for contracts completed in 2022 (50,000)

Balance of liability at end of 2022 230,000

3. In January 2022, 225,000 is collected in advance rental of a building for a 3-year period. The entire 225,000 is reported as taxable income in 2022, but 150,000 of the 225,000 is reported as unearned revenue in 2022 for financial reporting purposes.

4. During 2022, non-taxable governmental bond interest revenue was 24,000.

Required:

(1) determine the amount of the cumulative temporary difference for each transaction at December 31, 2021 and 2022.

(2) Compute taxable income for 2021 and 2022.

(3) Prepare the journal entry to record 2022 income tax expense, income taxes payable, and deferred taxes, assuming Akai is expected to have taxable income in all future years.

(4) Prepare the bottom portion of Akais 2022 income statement, beginning with Income before income taxes.

(5) Indicate how deferred income taxes should be presented on the December 31, 2022, statement of financial position.