Problem 2 (28 points) The accounting records of Parker Inc. Show the following data (2020 is its first year of operations). 1. Life insurance expense on officers was $8,000 every year (not tax deductible). 2. Equipment was acquired in early January 2020 for $300,000. Straight-line depreciation over a 5- year life is used, with no salvage value. For tax purposes, Parker used a 30% rate to calculate depreciation for 2020 and 2021. 3. Interest revenue on State of New York bonds totaled $3,000 every year(exempt from tax). 4. Product warranties were estimated and recognized as liability for $50,000 in 2020. Actual repair and labor costs related to the warranties in 2020 were $10,000. The remainder was paid evenly in 2021 and 2022 5. Gross profit on an accrual basis was $100,000. For tax purposes, $75,000 was recorded on the installment sales for 2020. The rest was recorded in 2021. 6. Fine incurred for pollution violations were $4,200 in 2020 (not tax deductible). 7. Pretax financial income was $750,000 for 2020 and NEGATIVE $300,000 (i.e., LOSS of 300,000) for 2021. The tax rate is 30% for 2020 and 20% for 2021 and thereafter. Required: 1. Prepare a schedule starting with pretax financial income in 2020 and ending with taxable income in 2020. 2. Prepare the journal entry for 2020 to record income taxes. 3. Prepare a schedule starting with pretax financial income in 2021 and ending with taxable income in 2021. 4. Prepare the journal entry for 2021 to record income taxes, assuming based on the weight of available evidence, it is more likely than not that all the future tax benefits will be realized. 5. Prepare the journal entry for 2021 to record income taxes, assuming based on the weight of available evidence, it is more likely than not that only one-third of the future tax benefits will be realized. Problem 2 (28 points) The accounting records of Parker Inc. Show the following data (2020 is its first year of operations). 1. Life insurance expense on officers was $8,000 every year (not tax deductible). 2. Equipment was acquired in early January 2020 for $300,000. Straight-line depreciation over a 5- year life is used, with no salvage value. For tax purposes, Parker used a 30% rate to calculate depreciation for 2020 and 2021. 3. Interest revenue on State of New York bonds totaled $3,000 every year(exempt from tax). 4. Product warranties were estimated and recognized as liability for $50,000 in 2020. Actual repair and labor costs related to the warranties in 2020 were $10,000. The remainder was paid evenly in 2021 and 2022 5. Gross profit on an accrual basis was $100,000. For tax purposes, $75,000 was recorded on the installment sales for 2020. The rest was recorded in 2021. 6. Fine incurred for pollution violations were $4,200 in 2020 (not tax deductible). 7. Pretax financial income was $750,000 for 2020 and NEGATIVE $300,000 (i.e., LOSS of 300,000) for 2021. The tax rate is 30% for 2020 and 20% for 2021 and thereafter. Required: 1. Prepare a schedule starting with pretax financial income in 2020 and ending with taxable income in 2020. 2. Prepare the journal entry for 2020 to record income taxes. 3. Prepare a schedule starting with pretax financial income in 2021 and ending with taxable income in 2021. 4. Prepare the journal entry for 2021 to record income taxes, assuming based on the weight of available evidence, it is more likely than not that all the future tax benefits will be realized. 5. Prepare the journal entry for 2021 to record income taxes, assuming based on the weight of available evidence, it is more likely than not that only one-third of the future tax benefits will be realized