Problem 19-04 (Part Level Submission) The accounting records of Pharoah Inc. show the following data for 2020 (its first year of operations). 1. Life insurance expense on officers was $8,800. 2. Equipment was acquired in early January for $323,000. Straight-line depreciation over a 5-year life is used, with no salvage value. For tax purposes, Pharoah used a 30% rate to calculate depreciation. 3. Interest revenue on State of New York bonds totaled $3,700. 4. Product warranties were estimated to be $48,400 in 2020. Actual repair and labor costs related to the warranties in 2020 were $9,000. The remainder is estimated to be paid evenly in 2021 and 2022. 5. Gross profit on an accrual basis was $104,000. For tax purposes, $78,500 was recorded on the installment-sales method. 6. Fines incurred for pollution violations were $4,100. 7. Pretax financial income was $785,300. The tax rate is 30%. Collapse question part (a)

Problem 19-04 (Part Level Submission) The accounting records of Pharoah Inc. show the following data for 2020 (its first year of operations). 1. 2. Life insurance expense on officers was $8,800. Equipment was acquired in early January for $323,000. Straight-line depreciation over a 5-year life is used, with no salvage value. For tax purposes, Pharoah used a 30% rate to calculate depreciation. Interest revenue on State of New York bonds totaled $3,700. Product warranties were estimated to be $48,400 in 2020. Actual repair and labor costs related to the warranties in 2020 were $9,000. The remainder is estimated to be paid evenly in 2021 and 2022. Gross profit on an accrual basis was $104,000. For tax purposes, $78,500 was recorded on the installment-sales method. Fines incurred for pollution violations were $4,100. Pretax financial income was $785,300. The tax rate is 30%. 7. (a) Your answer is correct. Prepare a schedule starting with pretax financial income in 2020 and ending with taxable income in 2020. Schedule of Pretax Financial Income and Taxable Income for 2020 Pretax financial income 785300 Permanent differences T Insurance Expense T 8800 T Bond Interest Revenue (3700) Pollution Fines 4100 794500 Temporary differences T Depreciation Expense T (32300) A (25500) Installment Sales Warranty Expense T T 1 39400 Taxable income 776100 Click if you would like to Show Work for this question: Open Show Work (b) Your answer is partially correct. Try again. Prepare the journal entry for 2021 to record income taxes payable, income tax expense, and deferred income taxes. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Account Titles and Explanation Debit Credit XL I IIIIIIII Income Tax Expense 234150 IIIIIIIIIII Deferred Tax Asset L 12780 Deferred Tax Liability 15393 T Income Tax Payable 231537 Click if you would like to Show Work for this question: Open Show Work