Question No. 1 Deferred Taxes Eagle River Inc. reports income before taxes for its first 3 years of operations as follows: Account 2018 2019 2020 Pretax financial income $ 950,000 $ 800,000 1,000,000 The income tax rate is 40%. There were no temporary tax differences with respect to financial reporting and tax returns prior to 2018. For income tax purposes the following differences exist between accounting income and taxable income: 1. For financial reporting Eagle River uses the straight-line depreciation method. For tax purposes Eagle River uses the accelerated depreciation method. The excess depreciation expenses on the tax returns are $30,000 (2018), $40,000 (2019), and $50,000 (2020). 2. Excess warranty expenses in financial income are $20,000 (2018), $10,000 (2019), and $5,000 (2020). Warranty expenses are not deductible for income tax purposes until paid. Required: a. Calculate taxable income for 2018-2020. b. Determine the deferred tax asset and deferred tax liability. c. Prepare the journal entries for 2018-2020. d. Prepare the balance sheet and income statement for 2020