Sherrod, Inc., reported pretax accounting income of $76 million for 2021. The following information relates to differences between pretax accounting income and taxable income:
a. Income from installment sales of properties included in pretax accounting income in 2021 exceeded that reported for tax purposes by $3 million. The installment receivable account at year-end 2021 had a balance of $7 million (representing portions of 2020 and 2021 installment sales), expected to be collected equally in 2022 and 2023.
b. Sherrod was assessed a penalty of $2 million by the Environmental Protection Agency for violation of a federal law in 2021. The fine is to be paid in equal amounts in 2021 and 2022.
c. Sherrod rents its operating facilities but owns one asset acquired in 2020 at a cost of $80 million. Depreciation is reported by the straight-line method, assuming a four-year useful life. On the tax return, deductions for depreciation will be more than straight-line depreciation the first two years but less than straight-line depreciation the next two years ($ in millions):
		d. For tax purposes, warranty expense is deducted when costs are incurred. The balance of the warranty liability was $2 million at the end of 2020. Warranty expense of $4 million is recognized in the income statement in 2021. $3 million of cost is incurred in 2021, and another $3 million of cost anticipated in 2022. At December 31, 2021, the warranty liability is $3 million (after adjusting entries).
		e. In 2021, Sherrod accrued an expense and related liability for estimated paid future absences of $7 million relating to the companys new paid vacation program. Future compensation will be deductible on the tax return when actually paid during the next two years ($4 million in 2022; $3 million in 2023).
		f. During 2020, accounting income included an estimated loss of $2 million from having accrued a loss contingency. The loss is paid in 2021, at which time it is tax deductible.
		Balances in the deferred tax asset and deferred tax liability accounts at January 1, 2021, were $1 million and $2.5 million, respectively. The enacted tax rate is 25% each year.
		Income Statement Tax return Difference 2020 $20 $26 (6) 2021 $20 35 (15) 2022 20 12 8 2023 20 7 13
		Required:
		1. Determine the amounts necessary to record income taxes for 2021, and prepare the appropriate journal entry. Complete Req. #1 only! Only enter data into highlighted cells! How to use the worksheet: read each lettered item of the problem from the textbook and determine which line item below is impacted. On that line item row, determine what the line item would be under GAAP/book reporting and put that amount in column F. Determine what the line item would be under tax reporting and put that amount in Column G. Only enter data into the highlighted cells and enter revenue/income as a positive number, and enter expenses as a negative number. I have completed letter c below as an example. ENTER REVENUE/INCOME AS POSITIVE, ENTER EXPENSES AS NEGATIVE! Tax Rate DTA Under Book Under Tax Change (Tax - Book) Revenue/Income (POSITIVE) Rent Revenue (tax income when received, book income when earned) - Subscription Revenue (tax income when received, book income when earned) - Other Revenue Received in Advance (tax income when received, book income when earned) - Expenses (NEGATIVE) - Warranty Expense (book expense when estimated, tax expense when paid) - Other Estimated Expense (book expense when estimated, tax expense when paid) - Unrealized Loss From FV of Investments (book expense when adjusted, tax expense when sold) - Total DTA - Total DTA * Tax Rate -$ JE DTL Revenue/Income (POSITIVE) Installment Sales (book income when sold, tax income when payments are received) - Unrealized Gain From FV of Investments (book income when adjusted, tax income when sold) - Expenses (NEGATIVE) - Depreciation (tax expense has accelerated depreciation, book expense is straight-line) - Prepaid Expenses (tax expense when paid, book expense when amortized) - Total DTL - Total DTL * Tax Rate -$ JE Pre-tax Book Income Permanent differences: + Nondeductible Expenses - Tax Exempt Income Income subject to taxation - -$ Temporary DTA: - Temporary DTL: - Taxable Income -$ -$ times tax rate = Income Tax Expense times tax rate = Income Tax Payable