The records for Phinn Co. show this data for 2014:

Gross profit on installment sales recorded on the books was $360,000. Gross profit for tax purposes from collections of installment receivables was $270,000.

Machinery was acquired in January for $300,000. Straight-line depreciation over a ten-year life (no residual value) is used. For tax purposes, Accelerated depreciation is used and Phinn may deduct 20% for 2014.

Interest received on governmental obligations was $9,000.

The estimated warranty liability related to 2014 sales was $19,600. Repair costs under warranties during 2011 were $13,600. The remainder will be incurred in 2015.

Pretax financial income is $600,000. The tax rate is 30%.

Instructions:

(a) Prepare a schedule starting with pretax financial income and compute taxable income.

(b) Prepare the journal entry to record income taxes for 2014.