Molnar Corporation reported the following results for Year 1, its first year in business: Taxable income (all taxable at 34%) . . . . . . . . . . . . . . $300,000 Accounting income (income before taxes). . . . . . . . . . $400,000 The difference between taxable income and accounting income resulted from the following: Income Income Tax Statement Return Depreciation $100,000 $150,000 Profit on installment sales 135,000 55,000 Product warranty expense 30,000 -0- REQUIRED: 1. Reconcile income before taxes to taxable income. 2. Prepare the journal entry to record the taxes for Year 1 assuming the following turnaround on temporary differences and a 34% tax rate for years 2-3 and 40% for years 4-5: Taxable/(Deductible) Years__________ 2 3 4 5 Depreciation $15 $15 $20 Installment Sales Profit 25 25 30 Product Warranty $(30) 3. Classify the deferred taxes for balance sheet purposes assuming installment sale receivables are classified as a current asset and product warranty is a long-term liability