Eagle Corporation had pretax income of $400,000 in 2021 (its first year of operation). As shown below, the income tax rate is 40% for the 2021 tax year. As described below, a temporary difference originated in 2021. Specifically, Eagle Corporation provided warranties for products sold in 2021 at no additional cost to the customers. The company accounts for warranty costs based on the accrual method for book purposes and based on actual experience for income tax purposes. Specifically, for book purposes Eagle expensed $300,000 in warranty costs during 2021 for products sold in 2021. For income tax purposes the $300,000 will be expensed as the actual warranty costs are incurred. Actual warranty costs for 2021 were $100,000, as expected. Additional warranty costs from 2021 sales are expected to be incurred as shown below. Year Warranty Cost 2022 $100,000 2023 $100,000 All temporary differences reversed as expected.