The records for Elizabeth Corp. show the following data for 2020:

• Machinery was acquired in January 2020. For book purposes the company uses straight-line depreciation and showed $50,000 in depreciation. For tax purposes,

  the company took a depreciation deduction of $85,000.

• Interest received on tax-exempt Johnston,RI bonds was $15,000

• The company records an estimate for warranty expenses in the period that a

  product is sold for GAAP reporting purposes. During 2020, it recorded an estimated expense of $35,000. For tax purposes, the company could only take $23,000 as a deduction.

• Pretax financial income for 2020 was $1,100,000.

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• The tax rate for 2020 is 32 %.

  Required:

  1. a) Prepare a schedule starting with pre-tax financial income and compute taxable income.

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

  3. c) Prepare a partial in come statement starting with “Income before Income Taxes”.