Company's pretax accounting income in its first year of operations (2001), $750,000. Warranty expense incurred was $200,000. Warranty service actually provided (and deducted for tax purposes) was $75,000. The balance of service under the one-year warranty is expected to be provided in 2002. The company also had $30,000 of tax-exempt interest income. Pretax accounting for 2002 was $900,000. Warranty expense incurred was $250,000. Actual warranty service provided cost $175.000. Depreciation on new equipment purchased during the year is determined using an accelerated method for tax purposes and straight-line for GAAP. The depreciation schedule is presented in the table below. YEAR GAAP TAX 2002 200,000 320,000 | 2003 200.000 240.000 2004 200,000 160,000 2005 200,000 80,000 Pretax accounting income for 2003 was $1,200,000. Warranty expense was $325,000. Actual warranty services provided cost $265,000. Depreciation was per the schedule above. The company began making sales on an installment basis in 2003. For GAAP purposes, the gross profit on these sales is recognized when made. The gross profit on the sales are taxed in the year collected. Assume that a third of each year's installment sales are collected in the year of the sale and a third in each of the two following years. Gross profit on the 2003 installment sales was $900,000 total. Pretax accounting income for 2004 was $2,200,000. Warranty expense was $400,000. Actual warranty services provided cost $335,000. Depreciation was per the schedule above. Gross profit on 2004 installment sales totaled $1,500,000. The company recognized a loss for an expected unfavorable settlement of a lawsuit of $2,000,000 during 2004. The loss can not be recognized for tax purposes until the judgment is paidwhich is expected to be in 2006. Pretax accounting income for 2005 was a loss of $2.800,000. Warranty expense was $250.000. Actual warranty services provided cost $350,000. Depreciation was per the schedule above. Gross profit on 2005 installment sales totaled $3,000,000. The company has a liability for claims and judgments of $2,000,000 at year end because the loss recognized in the prior year has not been paid yet. The loss can not be recognized for tax purposes until the judgment is paid- which is expected to be in 2007. YEAR ENACTED END TAX RATES 2001 30% 2002 30% 30% for 2003 35% for 2004 and beyond 2004 35% 2005 35% for 2005 and 2006 40% beginning in 2007 Show all work. Company's pretax accounting income in its first year of operations (2001), $750,000. Warranty expense incurred was $200,000. Warranty service actually provided (and deducted for tax purposes) was $75,000. The balance of service under the one-year warranty is expected to be provided in 2002. The company also had $30,000 of tax-exempt interest income. Pretax accounting for 2002 was $900,000. Warranty expense incurred was $250,000. Actual warranty service provided cost $175.000. Depreciation on new equipment purchased during the year is determined using an accelerated method for tax purposes and straight-line for GAAP. The depreciation schedule is presented in the table below. YEAR GAAP TAX 2002 200,000 320,000 | 2003 200.000 240.000 2004 200,000 160,000 2005 200,000 80,000 Pretax accounting income for 2003 was $1,200,000. Warranty expense was $325,000. Actual warranty services provided cost $265,000. Depreciation was per the schedule above. The company began making sales on an installment basis in 2003. For GAAP purposes, the gross profit on these sales is recognized when made. The gross profit on the sales are taxed in the year collected. Assume that a third of each year's installment sales are collected in the year of the sale and a third in each of the two following years. Gross profit on the 2003 installment sales was $900,000 total. Pretax accounting income for 2004 was $2,200,000. Warranty expense was $400,000. Actual warranty services provided cost $335,000. Depreciation was per the schedule above. Gross profit on 2004 installment sales totaled $1,500,000. The company recognized a loss for an expected unfavorable settlement of a lawsuit of $2,000,000 during 2004. The loss can not be recognized for tax purposes until the judgment is paidwhich is expected to be in 2006. Pretax accounting income for 2005 was a loss of $2.800,000. Warranty expense was $250.000. Actual warranty services provided cost $350,000. Depreciation was per the schedule above. Gross profit on 2005 installment sales totaled $3,000,000. The company has a liability for claims and judgments of $2,000,000 at year end because the loss recognized in the prior year has not been paid yet. The loss can not be recognized for tax purposes until the judgment is paid- which is expected to be in 2007. YEAR ENACTED END TAX RATES 2001 30% 2002 30% 30% for 2003 35% for 2004 and beyond 2004 35% 2005 35% for 2005 and 2006 40% beginning in 2007 Show all work