Problem 3 (20 marks) At the end of its first year of operations on December 31, 2021, the KHL Company reported pretax financial income of $160,000. An investigation of the income revealed the following items: a. A fine of $26,000 paid for violation of pollution laws was deducted in computing pretax financial income. b. Installment sales of $62,000 were recognized in financial income. These sales were accounted for by the installment sales method for income tax purposes. Only $32,000 was reported on the tax return. c. Warranty expenses of $41,000 were accrued for financial reporting purposes. Warranty deductions per the tax return amounted to $13,000. d. Depreciation of property, plant, and equipment of $20,000 was accrued for financial reporting purposes. Depreciation of these assets amounted to $52,000 for the tax return. e. Interest revenue earned on an investment in tax-exempted municipal bonds amounted to $6,000. f. KHL paid life insurance premium for its key officers of $12,000 in 2021, which is not tax-deductible. h. KHL accrued a loss of $22,000 for financial reporting purposes because of pending litigation. This amount is not tax-deductible until the period the loss is realized, which the company estimates to be 2022. Taxable income is expected for the next few years. Any deferred tax assets are considered more likely than not to be realized. The enacted income tax rate for all years is 30%. Required a. Compute taxable income for 2021. Use a schedule to show your computations. (9 marks) b. Compute income tax payable, deferred tax asset (liability), and income tax expense for 2021. Prepare the journal entry to record income tax expense and any related asset and liability for KHL on December 31, 2021. (11 marks)