Question 3: 40 points Peanut Butter Jelly Time, Inc. identified the following book-to-tax differences for the current year (3004): Pretax financial income $ 520,000 Life Insurance Premiums Tax Exempt Interest Estimated Warranty Liability Extra depreciation taken for tax purposes Estimated litigation loss 10,000 4,500 50,000 900,000 1,100,000 $?? Taxable income The estimated Warranty Liability is expected to be settled evenly over the next 2 years. Depreciation related to a new piece of Machinery purchased for $1,200,000. For tax purposes the company was able to write-off the entire cost. For book purposes the company will use the straight-line method with a useful life of 4 years (no salvage value). The estimated litigation loss relates to an unfavorable lawsuit - which the company expects to be settled and paid by 3007. Instructions (a) Prepare a schedule of future taxable and deductible amounts (not if an item doesn't belong on the schedule put a "0" in the total column". 3005 3006 3007 Total Life Insurance Premiums Tax Exempt Interest Estimate Warranty Liability Extra Depreciation Litigation (b) Complete the journal entry to record income, assuming a tax rate of 21% for all years. Income Tax Expense Deferred Tax Asset Deferred Tax Liability Income Tax Payable