Sandhill Company began operations at the beginning of 2021 . The following information pertains to this company. 1. Pretax financial income for 2021 is $88,000. 2. The tax rate enacted for 2021 and future years is 20%. 3. Differences between the 2021 income statement and tax return are listed below: (a) Warranty expense accrued for financial reporting purposes amounts to $7,700. Warranty deductions per the tax return amount to $1.900. (b) Gross profit on construction contracts using the percentage-of-completion method per books amounts to $100,901 Gross profit on construction contracts for tax purposes amounts to $65,900. (c) Depreciation of property. plant, and equipment for financial reporting purposes amounts to $55,200. Depreciation : these assets amounts to $77,000 for the tax return. (d) A $3,400 fine paid for violation of pollution laws was deducted in computing pretax financial income. (e) Interest revenue recognized on an investment in tax-exempt municipal bonds amounts to $1,400. 4. Taxable income is expected for the next few years. (Assume (a) is short-term in nature; assume (b) and (c) are long-term in nature.) (a) Your answer is correct. Compute taxable income for 2021. Taxable income for 2021 Compute the deferred taxes at December 31,2021 , that relate to the temporary differences described above. Deferred tax liability Deferred tax asset