You are required to make a copy of the tax return that Celia Brown, the previous controller, prepared, and then begin comparing the tax return to the draft of the company’s financial statements. You prepare the following schedule for this year: Panache, Inc. Book/Tax Differences 2009 Description Financial Statement Amount Tax Return Amount Depreciation $48,000 $40,000 Officers’ life insurance premiums $15,000 0 Interest revenue on municipal bonds $25,000 0 Product warranty costs $27,000 $20,000 Gross profit on installment sales $91,000 $80,000 In the tax file, you find the following schedule prepared by Ms. Brown: Panache, Inc. Deferred Tax Assets & Liabilities December 31, 2010 Item Amount Deferred Account Balance Deferred Tax Asset Warranties $49,500 $14,850 Deferred Tax Liabilities Depreciation $41,800 $12,540 Installment Sales $15,700 $4,710 The company’s current tax rate is 30 percent, and no changes in future tax rates have been enacted. You are required to: •Enter the information about book or tax differences in an Excel spreadsheet, and identify which differences are permanent and which are temporary. •Assuming Panache’s operating income as reported on the draft of the income statement is $120,000, compute taxable income and prepare the income tax entry needed in the same Excel spreadsheet. Also, assume the company expects to continue to be profitable and have taxable income indefinitely. explaining what income tax items will appear on the company’s balance sheet for December 31, 2010.