Problem: The accounting records of Pinecone Inc. show the following data for 2020:

1. Life insurance expense on officers was $5,800.

2. Equipment was acquired in early January for $540,000. Straight-line depreciation over a 9-year life is used, with no salvage value. For tax purposes, Pinecone used a 15% rate to calculate depreciation.

3. Interest revenue on municipal bonds totaled $4,800.

4. Product warranties were estimated to be $60,000 in 2020. Actual repair and labor costs related to the warranties in 2020 were $32,000. The remainder is estimated to be paid evenly in 2021 and 2022.

5. Sales on an accrual basis were $450,000. For tax purposes, $340,000 was recorded on the installment-sales method.

6. Fines incurred for securities violations were $4,800.

7. Pretax financial income was $724,000. The tax rate is 22% for 2020 and 26% for future years

Instructions:

(a) Prepare a schedule starting with pretax financial income in 2020 and ending with taxable income in 2020.

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