The following information is available for Adrianic Corporation for 2020, its first year of operations:

• Adrianics pretax income was $1,225,000.

• The enacted tax rates are: 40% for 2020, 35% thereafter.

• Because it is the companys first year of operations, there are no beginning balances in deferred tax asset (DTA) or deferred tax liability (DTL) accounts.

• Adrianic has the following book vs. tax differences:

  • Depreciation reported on the tax return exceeded depreciation reported on the income statement by $120,000. This difference will reverse in equal amounts of $40,000 per year over the years 2021 to 2023.

  • Interest received from municipal bonds was $25,000. Adrianic expects to receive $25,000 per year of municipal bond interest through 2023.

  • Cash received from customers on January 1, 2020 for 3-year subscriptions to Adrianics magazine totaled $90,000. Of this amount, $60,000 was reported as unearned income at December 31, 2020 for book purposes.

Required

1. Indicate whether each of the above differences is temporary or permanent.

2. For each difference, indicate if it will result in a DTA (future less tax) or DTL (future more tax).

3. Compute Adrianics taxable income for 2020.

4. Compute income taxes payable for 2020.

5. Prepare a schedule showing when/how the temporary differences reverse - use this information to compute the DTA and/or DTL.

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