The following information has been obtained for Crane Corporation.

Prior to $2025,$ taxable income and pretax financial income were identical.

Pretax financial income is $$1,554,000$ in $2025$ and $$1,355,000$ in $2026.$

On January $1,2025,$ equipment costing $$1,208,000$ is purchased. It is to be depreciated on a straight$-$line basis over $5$ years for tax purposes and over $8$ years for financial reporting purposes. $($Hint: Use the half$-$year convention for tax purposes, as discussed in Appendix $10$A$.)$

Interest of $$56,000$ was earned on tax$-$exempt municipal obligations in $2026.$

Included in $2026$ pretax financial income is a gain on discontinued operations of $$188,000,$ which is fully taxable.

The tax rate is $20\%$ for all periods.

Taxable income is expected in all future years.

$($a$)$

Your answer is correct.

Compute taxable income and income taxes payable for $2026.$

Taxable income

Income taxes payable

eTextbook and Media

List of Accounts

Attempts: $1$ of $6$ used

$($b$)$

Your answer is partially correct.

Prepare the journal entry to record $2026$ income tax expense, income taxes payable, and deferred taxes. $($List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manualty. If no entry is required, select $"$No Entry" for the account titles and enter $0$ for the amounts.$)$

Account Titles and Explanation

Debit

Credit

$$ Income Tax Expense

Deferred Tax Asset

Deferred Tax Liability

Income Tax Payable $$