Deferred Taxes Exercises Exercise 1 Wicked, Inc. reports $223,000 of income before taxes on the income statement for 2018 - its first year in business. Wicked identifies the following differences between the tax return and income statement. There was $20,000 of municipal bond interest income included in the 223,000 but is not taxable on the tax return. Wicked estimated its bad debt expense at $12,000 (included in the 223,000) for the income statement and wrote off $3,500 in bad debts during the year (tax return). Wicked purchased assets during 2018 that totaled $61,500 and will have a useful life of 7 years with no salvage value. For the income statement Wicked used straight line depreciation and the half year convention. In preparing, the tax return for 2018, Wicked will take advantage of 100% bonus depreciation in the year of purchase on all the assets. The enacted tax rate is 21%. Required: 1. Calculate taxable income. 2. Give journal entries needed to record taxes. 3. Classify deferred taxes as current or long term 4. Show calculation of net income. 5. Show reconciliation of statutory rate and effective tax rate.