Kent Wesley is a junior member of the external audit team hired to audit Aldridge Inc.'s Year 2 financial statements. Kent has been tasked with reviewing differences related to Aldridge's financial statements versus its tax forms from Year 1 in order to prepare for the Year 2 audit. After reading through the workpapers gathered from the company's financial reporting group, Wesley prepares notes shown in the exhibit to discuss with his manager. Workpaper ReviewNotes General: Aldridge uses U.S. GAAP and has a tax rate of 30% in Year 1. During Year 2 the tax rate was increased to 35% for Year 2 and beyond. On the liability side, it had income tax payable of $35,500 in Year 1 and an estimated $28,900 in Year 2. Year 1: MarLife Co. life insurance policy on Chief Operating Officer where Aldridge is sole beneficiary paid out $200,000 to Aldridge. Advance royalties received of $50,000 for anticipated sales during Year 2. Different depreciation methods usedfinancial statement depreciation is straight-line, $35,000, and tax depreciation is accelerated, $52,000. Records show a $1,000 fine paid to the IRS for failure to provide required paperwork. Bad debt expense booked on receivables of $25,000. Next Steps: Evaluate differences to determine whether DTA or DTL is appropriate; prepare Year 1 and 2 related journal entries for comparison to Aldridge general ledger.