The following information is provided:

Income before Taxes = $900,000

Income before Taxes Included the following:

Interest Income = $80,000 (from municipal bonds)

Rental income collected in advance in 2013 and earned in 2014 = $20,000

Depreciation per books = $40,000

Depreciation per income tax = $100,000

Warranty Expense in 2014 = $20,000

Warranty Expense for Tax purposed = $5,000 (Deductible)

Assume that at the beginning of 2014 the deferred tax asset balance = $8,000 (rent income)

Tax rate for 2014 and the foreseeable future is 40%.

Required:

a. Calculate taxable income.

b. Make the necessary tax entry. Be sure to include the amounts for tax expense and deferred taxes.