In 2020, the initial year of its existence, Lands accountant, in preparing both the income statement and the tax return, developed the following list of items causing differences between accounting and taxable income:

1. The company sells its merchandise on an installment contract basis. In 2020, Lands elected, for tax purposes, to report the gross profit from these sales in the years the receivables are collected. However, for financial statement purposes, the company recognized all the gross profit in 2020. These procedures created a $300,000 difference between book and taxable incomes, which is expected to reverse equally over the next three years.

2. The company has also chosen to depreciate all of its depreciable assets on an accelerated basis for tax purposes but on a straight-line basis for accounting purposes. These procedures resulted in $60,000 excess depreciation for tax purposes over accounting depreciation in 2020. The temporary difference due to excess tax depreciation will reverse equally over the next three years.

3. The estimated warranty liability related to 2020 sales was $21,600. Repair costs under warranties during 2020 were $11,600. The remainder will be incurred in equally in 2021 and 2022.

4. Lands owns $200,000 of bonds issued by the State of Oregon upon which 5% interest is paid annually. Lands showed $10,000 of income from the bonds on its 2020 & 2021 income statement but did not show any of this amount on its tax return.
5. In 2020, Lands insured the lives of its chief executives. The premium amounts to $15,000 per year and was shown as an expense on the income statements. However, this amount was not deducted on the tax returns. The company is the beneficiary.

Assuming that the income statement of Lands Company for 2020 and 2021 showed "Income before income taxes" of $1,400,000 and $1,600,000, respectively; that the enacted tax rates are 30%, 30%, 35%, and 40% for 2020, 2021, 2022, and 2023, respectively; and that no other differences between book and taxable incomes existed, except for those mentioned above:

(a) Compute the taxable income for 2020 and 2021.

(b) Prepare the journal entry recording income tax expense, income tax payable, and deferred income taxes for 2020 and 2021.

2020:

2021: