(1) On December 31, 2020, Owl Co. changed its inventory valuation method from weighted average to FIFO for GAAP. This change results in a $450,000 decrease in the beginning inventory at January 1, 2020. The tax rate is 45%. Based on the entry required for this change, what amount is the cumulative loss reducing beginning retained earnings on the statement of stockholders' equity for the year ending 2020?

$450,000

There is no loss, it is a gain

$247,500

$202,500

(2) Owl Co. reported pre-tax income of $300,000 and taxable income of $100,000 in 2020 based on an original temporary difference. The tax rate is 25% in 2020, but under a recent enacted tax law, rates will be 30% in 2021 and 35% in 2022. Assuming the 2020 difference reverses in 2022, what is Fox's 2020 income tax expense?

$95,000

$105,000

$75,000

$50,000