In 2023, its first year of operations, Arlington Company reports $103,600 of income before taxes. Arlington computes its taxable income after considering the following issues: 1. Arlington sells various products with an assurance product warranty. Based on industry averages, Arlington estimates that costs associated with the 2-year warranty will be about $32,000. In 2023, Arlington incurs $14,000 of costs for warranty claims. 2. Finding itself with surplus cash, Arlington invests $100,000 in tax-free municipal bonds and earns $5,000 interest in 2023. 3. 4. Arlington collected $84,000 in November 2023 from a business that is going to be able to rent an unused portion of its warehouse. The $84,000 covers the rental for the two years 2024-2025, and therefore no rental revenue has been recognized for 2023. However, Arlington must pay taxes on the entire amount collected in 2023. An accelerated depreciation method is used for tax purposes. In 2023, Arlington reports $28,000 more depreciation expense for tax purposes than it shows in the accounting records. The excess depreciation is expected to reverse in 2026. The enacted tax rate in 2023 is 21%. Required: a. b. C. Calculate taxable income for 2023. You need to label all items. $ 103,600 Taxable Income: $ 13,986 $ (14,000) Also add back expenses taken--not permitted for tax. You need to consider which of your changes will be taxable or deductable in the future, and then compute DTL and DTA appropriately. $ 5,000 Interest revenue should be deducted--not taxable. $ (28,000) $ 66,600 21% $ 13,986 You also need to add in the rent revenue collected in advance; it isn't in accounting income but needs to be taxed because cash was collected. Prepare the journal entry necessary to record income taxes at the end of 2023. Income Tax Expense Income Tax Payable $ 13,986 $ 13,986 How would any deferred tax amounts be reported on a classified balance sheet? It would be listed under currenet liabilities. It would be listed as Deferred Tax Liablitlies: $13,986 No, that would be the income tax payable. The DTA and DTL would be netted and would appear as non-current deferred taxes.