18-23 Please

Velcro Inc. began business in 2021. In preparing Velcro's financial statements and income tax return for 2022, you discovered the following: Velcro Inc. leased part of its office building to Sticky Inc. on September 1, 2021, for an advance payment of $156,000. The lease covers 18 months, and the advance payment was for 12 months. On September 1, 2022, Sticky paid the remaining $78,000 on the rent contract. . . Velcro earned $25,000 of interest from its investment in U.S. Treasury bills. Velcro was fined $15,000 by the Environmental Protection Agency for polluting the air. Velcro did not appeal the EPA's decision and paid the fine in December Velcro acquired capital assets for $324,000 in 2021. For financial reporting, the assets have a 6- year useful life and $0 salvage. For income taxes, the capital assets are 5-year property and cost will be recovered using the mid-year convention. Year Depreciation expense Accounting Tax 2021 $54,000 S 65.000 2022 54,000104,000 2023 54.000 62.000 2024 54.000 37,000 2025 54,000 37,000 2026 54.000 19,000 Velcro sold some real estate in 2021 for a gain of $130,000. For federal income taxes, the gain will be reported using the installment method. Gain reported on the income statement Gain reported on tax the tax return $130,000 2021 2022 2023 2024 $28,000 40.000 40,000 22.000 . In 2022, Velcro began accruing its one-year limited assurance warranty expense. For 2022, Velcro estimated its warranty expense to be $36,000. Actual warranty work done in 2022 amounted to $24,000 Additional information for 2022 S1,125,000 1.064.000 21% Income before income tax reported on the income statement Taxable income reported on line 28 of Form 1120 Tax rate Estimated income tax paid cach quarter Deferred tax asset at the beginning of 2022 Deferred tax liability at the beginning of 2022 55,000 21.840 23.730 ilm Questions 18 through 24 involve the reconciliation of protax accounting income to taxable income (schedule M-1) for 2022. For ench question, indicate the type of difference (temporary or permanent) and indicate whether the amount of the item is added or subtracted to determine taxable income for 2022 18. The gain from the sale of real estate in 2021: Type of difference Treatment in the reconciliation . Permanent Added B Temporary Subtracted C. Permanent Subtracted D Temporary Added 19. The rent from the advance payment in 2021: Type of difference Treatment in the reconciliation A Permanent Added B Temporary Subtracted C. Permanent Subtracted D. Temporary Added 20. The rent from the advance payment in 2022: Type of difference Treatment in the reconciliation A. Permanent Added B Temporary Subtracted C Permanent Subtracted D Temporary Added 21. The excess of tax depreciation over book depreciation: Type of difference Treatment in the reconciliation A Permanent Added B Temporary Subtracted C Permanent Subtracted D Temporary Added 22. The air pollution fine paid to the EPA: Type of difference Treatment in the reconciliation A Permanent Added . Temporary Subtracted c Permanent Subtracted D Temporary Added 23. The excess of warranty expense per books over warranty expense per tax Type of difference Treatment in the reconciliation A Permanent Added B Temporary Subtracted Permanent Subtracted D Temporary Added