This is an accounting question related to Accounting for Income Taxes. It has two parts. Please show all work/calculations and formulas used.Otis, Inc. began operations in 2013. Otis’ pretax accounting income (i.e book income) from the 2013 income statement was $1,070,000.During the year Otis booked the following amounts in its financial statements$20,000 of unearned revenue$65,000 of expenses related to a fine levied by the EPA (environmental Protection Agency)Warranty expenses of $100,000 of which $45,000 were actually performed during the yearPrepaid rent of $180,000Otis purchased one piece of equipment on 1/1/2013 at a cost of $240,000. For books, it is depreciated using the straight-line method over a three year useful life with no salvage value. For tax, it is depreciated as follows: 50% in 2013, 30% in 2014, and 20% in 2015. (hint: the difference in depreciation is what is relevant to calculate taxable income)The tax rate is 40% and there are no new enacted future tax rates.Required:1) Prepare a schedule computing the company’s 2013 taxable income. (hint: there are 5 differences to account for 3 increase taxable income 2 decrease it). Show calculations.2.) Prepare the necessary journal entry to record income taxes for 2013. Show calculations.
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