DeJohn Company, which began operations at the beginning of 2012, produces various products on a con-tract basis. Each contract generates a gross profit of $80,000. Some of DeJohns contracts provide for the customer to pay on an installment basis. Under these contracts, DeJohn collects one-fifth of the contract revenue in each of the following four years. For financial reporting purposes, the company recognizes gross profit in the year of completion (accrual basis). For tax purposes, DeJohn recognizes gross profit in the year cash is collected (installment basis).Presented below is information related to DeJohns operations for 2014:

1. In 2014, the company completed 6 contracts that allow for the customer to pay on an installment basis. DeJohn recognized the related gross profit of $480,000 for financial reporting purposes. It reported only $96,000 of gross profit on installment sales on the 2014 tax return. The company expects future collections on the related installment receivables to result in taxable amounts of $112,000 in each of the next four years.

2. In 2014, nontaxable municipal bond interest revenue was $28,000. 3. During 2014, nondeductible fines and penalties of $26,000 were paid.

4. Pretax financial income for 2014 amounts to $625,000.

5. Tax rates (enacted before the end of 2014) are 35% for 2014 and 2015 and later.

6. The accounting period is the calendar year.

7. The company is expected to have taxable income in all future years.

8. The company has no deferred tax assets or liabilities at the end of 2013.

QUESTTION:

1.Calculate taxable income for 2014

2. Prepare the journal entry to record income taxes for 2014

3. Prepare the journal entry to record income taxes for 2015 assuming financial income for 2015 is $400,000.

NOTE: Number 1, 4, 5 are different from the problem from edition 15. If you only have the answer to the book's problem, please note so.