Chapter 19 Case 2 Paul Davis Company began operations in 2021 and has provided the following information. 1. Pretax financial income for 2021 is $200,000 2. The tax rate enacted in 2021 and future years is 30% 3. Differences between the 2021 income statement and tax return are listed below. a. Warranty expense accrued for financial reporting purposes amounts to $4,000. Warranty deductions per the tax return amount to $2,000. b. Gross Profit on construction contracts using the percentage- Ooof-completion method for book purposes amounts to $140,000. Gross profit on construction contracts for tax purposes amounts to $100,000. c. Depreciation on property, plant, and equipment for financial reporting purposes amounts to $50,000. Depreciation on these assets amounts to $75,000 on the tax return. d. A $8,000 fine for OSHA violations was deducted in computing pretax financial income. e. Interest revenue earned on an investment in tax-exempt municipal bonds amounts to $2,100. 4. Taxable income is expected for the next few years. Instructions: a. Prepare a schedule to calculate taxable income, the deferred tax liability and the deferred tax asset. b. Prepare the Journal entry to record the income tax expense, deferred taxes, and income taxes payable for 2021. c. Prepare the income tax expense section of the income statement beginning with Income before income taxes