27. (9 points) At the end of its first year of operations (2019), Ace reported the following: $2,100,000 120,000 4,000 16,000 40,000 45,000 Pretax (GAAP-based) financial income for 2019 Book depreciation of $150,000 and tax depreciation of $320,000 Fine expense/penalty for violating a federal law Interest income on municipal bonds for the year Prepaid rental expense as of 12-31-19 Unearned revenue as of 12-31-19 Accrued warranty expense payable as of 12-31-19 Investment income on Ace's 40% ownership in Oster Company's common stock; during 2019, Oster did not declare any dividends on its common stock. Pension expense on Ace's defined benefit plan for the year Contributions made to Ace's defined benefit pension plan during the year Bad debt expense for the year Write-offs during the year Unrealized holding loss for the year on an available-for-sale investment security 75,000 93,000 100,000 12,000 7,000 5,000 Ace expects the excess depreciation to reverse as follows: $70,000 in 2020; $50,000 in 2021; $30,000 in 2022; $10,000 in both 2023 and 2024. Ace expects the unrealized holding loss to reverse in 2020. Ace expects the accrued warranty expense payable to reverse as follows; $6,000 in 2020; $15,000 in 2021; $24,000 in 2022. Ace expects the prepaid rent will be used up in 2020 and the unearned revenue will be earned in 2020. Ace expects all other temporary differences to reverse evenly in 2020, 2021, and 2022. Enacted tax rates are as follows: 2019: 24% 2020: 22% 2021 and thereafter: 20% Prepare a schedule reconciling Ace's 2019 pretax financial income to its taxable income. Identify EACH item in your reconciliation as a permanent difference or a temporary difference. If the item is a temporary difference, indicate if it creates a deferred tax asset or a deferred tax liability. Prepare the journal entry to record Ace's income tax expense, deferred taxes, and income taxes payable for 2019. In addition, reconcile Ace's pretax income amount at 2019's income tax rate with the income tax expense amount Ace will report on its 2019 income statement. 27. (9 points) At the end of its first year of operations (2019), Ace reported the following: $2,100,000 120,000 4,000 16,000 40,000 45,000 Pretax (GAAP-based) financial income for 2019 Book depreciation of $150,000 and tax depreciation of $320,000 Fine expense/penalty for violating a federal law Interest income on municipal bonds for the year Prepaid rental expense as of 12-31-19 Unearned revenue as of 12-31-19 Accrued warranty expense payable as of 12-31-19 Investment income on Ace's 40% ownership in Oster Company's common stock; during 2019, Oster did not declare any dividends on its common stock. Pension expense on Ace's defined benefit plan for the year Contributions made to Ace's defined benefit pension plan during the year Bad debt expense for the year Write-offs during the year Unrealized holding loss for the year on an available-for-sale investment security 75,000 93,000 100,000 12,000 7,000 5,000 Ace expects the excess depreciation to reverse as follows: $70,000 in 2020; $50,000 in 2021; $30,000 in 2022; $10,000 in both 2023 and 2024. Ace expects the unrealized holding loss to reverse in 2020. Ace expects the accrued warranty expense payable to reverse as follows; $6,000 in 2020; $15,000 in 2021; $24,000 in 2022. Ace expects the prepaid rent will be used up in 2020 and the unearned revenue will be earned in 2020. Ace expects all other temporary differences to reverse evenly in 2020, 2021, and 2022. Enacted tax rates are as follows: 2019: 24% 2020: 22% 2021 and thereafter: 20% Prepare a schedule reconciling Ace's 2019 pretax financial income to its taxable income. Identify EACH item in your reconciliation as a permanent difference or a temporary difference. If the item is a temporary difference, indicate if it creates a deferred tax asset or a deferred tax liability. Prepare the journal entry to record Ace's income tax expense, deferred taxes, and income taxes payable for 2019. In addition, reconcile Ace's pretax income amount at 2019's income tax rate with the income tax expense amount Ace will report on its 2019 income statement