Eastern Publrshers Ltd {EPL} is preparing its December 31, 2020 yearend nancial statements. EPL focuses on corporate clients by binding and publishing corporate directories, policy manu- als, and other large documents along with publishing short novels and books. This is the first year ofoperations, and a preliminary:I estimate of pretax net income has been calculated as follows: Revenue $5,278,500 Cost of goods sold 2,215,970 Gross margin 3,061,530 Operating costs Advertising 75,435 Amortization 250,000 Bankcharges 15,500 Contracted services 17,500 Lease expense14,525 Meats and entertainment 78,000 Repairs 25,000 Supplies 57,250 Telephone 12,500 Travel 7,850 Utilities 254,800 Warranty 37,500 Wages and benets 275,000 Total operating costs 1,120,910 Pretax net income $1,940,520 You are working in EDL's accounting department and have been asked to prepare a preliminary estimate ofthe income tax expense. The current tax expense will not be paid until the next {is- cal year. The controller of EPL provides you with the following few notes to help you get started: I The depreu'ation expense relates to a new machine that was acquired on January 1, 2020 for $5 million and has a useful life of 20 years. This machinery is included as class 43 [30%) for can purposes. Note that the half-year rule is in effect for tax purposes. I EPL provides an assurance-type warranty on its book binding for corporate ctients. Cor- porate clTents can return their bound material over atwo-year period ifthe glue breaks down. No books have been returned for rebinding during 2020; however, estimated expenses have been recognized in the current year. 0 The lease expense is related to a 30 printer that is being leased fortwo years for $34,525 per year. The printer has an expected usefui life ofve years. There is no provisron in the lease that would allow EPL to purchase the printer. ll purchased, the printer would cost $150,000. I Included in wages and benets is accrued pension expense of $7,500. During the year the company contributed 55,000 to its Defined Benet plan [which was set up at the beginning of the year). EPL has an average tax rate of 35% and an incremental borrowing rate of 10%. EPL fcllows ASPE