Assume P3 had a pre-tax financial income of $9,775,000 as well as the following information related to computing deferred taxes for 2020.

During 2020, the company received $27,500 in interest from municipal bonds.

Depreciation for MACRS was $450,000 higher than depreciation expense.

In December 2020, $815,000 was received for work that will be performed by P3 in January 2021.

The company paid $39,000 in various fines related to state and federal driving violations incurred by their drivers delivering equipment to various amusement parks around the country.

The company recorded a contingent expense for $1,200,000, related to a lawsuit in which company attorneys believe it is probably that P3 will lose.

The company paid $41,000 in insurance premiums for life insurance on the CEO. The company is the beneficiary of that policy.

In December 202, the company received $800,000 in settlement of a lawsuit that originated in 2016. P3 had sued a customer for breach of contract, and to stop the endless legal proceedings agreed to this settlement amount.

The company recorded $67,000 more in warranty expense than it paid out in 2020.

Employees exercised 40,000 stock options during 2020. The exercise price of these options was $10 per share. These options had been granted in 2015 and had a 4-year vesting period. At the time they were granted, the estimated value of the grant using the Black-Scholes option pricing model was $890,000.

P3 received $67,000 more than it recorded in interest revenue associated with leased equipment and paid $34,000 more than it recorded in interest expense associated with leased equipment.

Required: Compute Taxable Income

Record the appropriate entry for tax expenses related to the above information. Be sure to detail your determination of deferred tax assets and deferred tax liabilities (if any).

What entry would have been made if P3 assumed only 40% of any deferred tax asset would be realized in future years?

Assume P3 , at January 1, 2020, had a Deferred Tax Liability Balance of $50,000, based on the above, what would appear related on the 2020 balance sheet related to Deferred Taxes? If in the future P3 experiences a Net Operating Loss when computing taxable income, explain briefly how that would be handled.