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Use the information below to answer questions a-j. 1. Velcro Inc. began business in 2021. In preparing Velero's financial statements and income tax return for 2022, you discovered the following: Velcro Inc. leased part of its office building to Sticky Inc. on September 1, 2021, for an advance payment of $156,000. The lease covers 18 months, and the advance payment is for 12 months. On September 1, 2022, Sticky paid the remaining $78,000 on the rent contract. Velcro eamed $25,000 of interest from its investment in U.S. Treasury bills. Velcro was fined $15,000 by the Environmental Protection Agency for polluting the air. Velcro did not appeal the EPA's decision and paid the fine in December. Velcro acquired capital assets for $324,000 in 2021. For financial reporting, the assets have a 6-year useful life and $0 salvage. For income taxes, the capital assets are 5-year property and cost will be recovered using the mid-year convention. Year Depreciation expense Accounting Tax 2021 $54,000 $ 650.00 2022 54.000 104,000 2023 54.000 62,000 2024 54 0,00 37,000 2025 54 0.00 37,000 2026 54.000 19,000 Velcro sold some real estate in 2021 for a gain of $150,000. For federal income taxes, the gain will be reported using the installment method. Gain reported on the income statement Gain reported on tax the tax return $130,000 2021 2022 2023 2024 $28,000 40.000 40.000 22.000 . In 2022, Velcro began accruing its warranty expense. For 2022, Velcro estimated its warranty expense to be $36,000. Actual warranty work done in 2022 amounted to $24,000. Additional information for 2022: . . . Income before income tax reported on the income statement Taxable income reported on line 28 of Form 1120 Tax rate Estimated income tax paid each quarter Deferred tax asset at the beginning of 2022 Deferred tax liability at the beginning of 2022 For each of the following questions $1,125,000 1045.000 21% 53,750 21,840 23,730 . Questions a through g involve the reconciliation of pretax accounting income to taxable income (schedule M-1) for 2022. For a-g, indicate the type of difference (temporary or permanent) and indicate whether the amount of the item is added or subtracted to determine taxable income for 2022 a) The realized gain related to the sale of real estate in 20213 Type of difference Treatment in the receniciliation 1. Panana Added 2 Temporary Subtracted 1. Pensie Suhtracted 4. Temporary Added b) The rent carried in 2022 from the advance payment in 2021: Type of difference Treatment in the reconciliative 1. Pertancat Added 2 Temporary Subtracted Penance Subtracted 4. Temporary Added c) The uneamed rent at December 31, 2022, from the advance payment in 2022: Type of difference Treatment in the reconciliation Permanent Added 2. Temporary Subtracted 3. Permanent Subtracted 4. Temporary Added d) The excess of tax depreciation aver book depreciation in 2122: Type of difference Treatment in the reconciliation 1. Permanent Added 2 Temporary Subtracted 3. Permanent Subtracted 4. Temporary Added e) The air pollution fine paid to the EPA in 24:22: Type of difference Treatment in the reconciliation 1. Pemine Added 1 Temporary Subtracted 1. Permanent Subtracted 4. Temporary Added 1) The excess of warranty expense per books over warranty expense per tax Type of difference Treatment in the reconciliation 1. Permanent Added 2 Temporary Subtracted 3. Pennanen Subtracted 4. Temporary Added 1 8! The interest eared on US. Treasury bills in 2022 is a 1. Temporary difference that could be deducted online in schedule M-L. 2 Permaneat difference that should be added on line 4 in schedule M-1. 3. Permanent difference that could be deducted on line 7 in Schedule M-I. 4. None of the above. h) At December 31, 2022, total future taxable amounts were deductible amounts were and the total future 1. $123,000, $12,000. 2. $139,000, $33,000. 3. $131,000, $45,000. 4. $112,000, $61,500. 5. S111,000, $28,500. 1) At December 31, 2022, what is the balance in the deferred tax liability? What is the balance in the deferred tax? 1. S 74 200 $21,350. 2. $ 99.400. $19,600. 3. $ 94,150, $9,800. 4. $102,550, $13,300. 5. $ 94, 650, $24,150. ) For the year ended December 31, 2022, Velcro's tax expense for financial reporting is 1. $219,450. 2. $204,960. 3. $229,940. 4. $233,940